USD/CAD posts modest daily gains around 1.2650 ahead of BoC policy announcements
|- USD/CAD is trading in a tight range following Tuesday's decline.
- WTI consolidates weekly losses, hold above $64 ahead of EIA data.
- Bank of Canada is expected to keep its policy rate unchanged at 0.25%.
The USD/CAD pair dropped below 1.2600 on Tuesday but staged a rebound to close the day with small losses at 1.2634. With the market action turning subdued ahead of key macroeconomic events on Wednesday, the pair is trading in a tight range around 1.2650 and posting small daily gains.
Eyes on US inflation data, BoC policy decision
Despite the broad-based USD weakness, the poor performance of crude oil made it difficult for the CAD to continue to gather strength and helped USD/CAD limit its losses. Following a two-day drop, the barrel of West Texas Intermediate (WTI) is up 0.6% on the day at $64.20 ahead of the US Energy Information Administration's (EIA) weekly Crude Oil Stocks Change data.
Meanwhile, the US Dollar Index is moving sideways around 92.00 supported by the recovery witnessed in the 10-year US Treasury bond yield, which lost 4.5% on Tuesday.
Later in the session, the Consumer Price Index data from the US will be looked upon for fresh impetus. Although the Fed uses the Personal Consumption Expenditures (PCE) Price Index as its preferred gauge of inflation, a higher-than-expected reading in Core CPI could help the USD find demand.
More importantly, the Bank of Canada (BoC) will release its Interest Rate Decision and publish the Rate Statement at 1500 GMT. The BoC is largely expected to keep its policy rate unchanged at 0.25% but the CAD could start to weaken against its rivals if the bank adopts a dovish tone in its policy statement.
Technical levels to watch for
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