Canadian Dollar steady ahead of inflation report

The Canadian dollar has edged lower on Tuesday. In the European session, USD/CAD is trading at 1.3718, down 0.12% on the day.

Canada's CPI expected to hold at 1.7%

Canada releases the May inflation report later today. The Bank of Canada will hoping for the report provides some clarity on inflation after a mixed report in April. Headline CPI fell sharply to 1.7% in April from 2.3%, as energy prices dropped and the government removed a consumer carbon tax. At the same time, the key core CPI indicator, CPI Trimmed Mean, surprised on the upside in April, rising to 3.1% from 2.9%.

For May, Headline CPI is expected to remain at 1.7%, while CPI Trimmed Mean is projected to tick lower to 3.0% from 3.1%.

BoC Governor Tiff Macklem called the current inflation picture "complicated" last week, noting that the increase in underlying inflation could signal that the trade war with the US is pushing inflation higher.

Like many central banks, the BoC has adopted a wait-and-see attitude due the uncertainty around US tariff policy, and the war between Iran and Israel has made the BoC even more cautious about lower rates. The central bank has remained on the sidelines for the past two meetings and meets again on July 30.

Israel-Iran ceasefire raises risk appetite, sends Oil lower

Oil prices are down about 2% on Tuesday after Israel and Iran agreed to a US-brokered ceasefire. Iran had threatened to close the Straits of Hormuz after the US attacked Iranian nuclear sites on the weekend, raising concerns about oil supply disruptions. Investors have regained their risk appetite and the Australian and New Zealand dollars, both risk currencies, have recorded sharp gains against the US dollar today.

USD/CAD technical

• USD/CAD has pushed below support at 1.3739 and is testing support at 1.3729. Below, there is support at 1.3708
• There is resistance at 1.3740 and 1.3750.