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Canadian Dollar holds firm against US Dollar ahead of US CPI

  • USD/CAD remains under pressure, though a firm US Dollar helps limit the downside.
  • US CPI takes center stage as traders weigh the possibility of a Fed rate hike in September.
  • TD Securities expects the BoC to keep rates unchanged through 2026.

USD/CAD trades under pressure on Tuesday, staying on the back foot for a third straight day. However, the pair lacks follow-through selling as the US Dollar (USD) holds firm ahead of Wednesday’s US Consumer Price Index (CPI) data. At the time of writing, USD/CAD trades around 1.3930, near a two-month low.

Oil prices remain volatile as traders watch for signs that the Strait of Hormuz could reopen under a proposed arrangement between Iran and Oman. Qatar’s Foreign Ministry spokesperson said on Tuesday that talks between the two countries had reached an advanced stage.

The Canadian Dollar (CAD) is highly sensitive to Oil prices due to Canada’s status as a major crude exporter. West Texas Intermediate (WTI) trades around $81.50, down from an intraday high of $83.57 but still up more than 5% so far this week.

Elevated Oil prices continue to threaten the inflation outlook, reinforcing expectations that major central banks may need to keep monetary policy tight.

Traders now await Wednesday’s US Consumer Price Index (CPI) data for more clarity on the Federal Reserve’s (Fed) interest rate path. The CME FedWatch tool shows a 50% chance of a rate hike at the September meeting.

Turning to the Canadian side, the economic calendar is relatively light this week, leaving price action largely at the mercy of Oil price swings and broader market developments ahead of Canada’s inflation data next week.

According to TD Securities, “we look for the Bank of Canada to stay on hold at 2.25% through 2026 before a return to neutral (2.75%) next year, with 25bp hikes in January and March 2027.” The bank notes that “oil prices have largely normalized after pushing above $100bbl in response to the US-Iran conflict,” but cautions that this episode “has still introduced a meaningful shock to the inflation outlook with headline CPI sitting near the top of its 1-3% target range.”

Even so, TD Securities anticipates a cautious policy stance, writing that “we look for the BoC to remain patient as it waits for more clarity on the geopolitical outlook and spillovers to domestic CPI as the combination of well-anchored expectations, narrower inflation breadth, and muted core inflation momentum leave the Bank well positioned to look through stronger headline CPI.”

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD0.03%0.00%-0.05%-0.07%-0.11%0.04%0.07%
EUR-0.03%-0.02%-0.06%-0.08%-0.11%0.00%0.06%
GBP-0.00%0.02%-0.04%-0.06%-0.10%0.02%0.08%
JPY0.05%0.06%0.04%-0.03%-0.06%0.06%0.13%
CAD0.07%0.08%0.06%0.03%-0.02%0.09%0.15%
AUD0.11%0.11%0.10%0.06%0.02%0.12%0.17%
NZD-0.04%-0.01%-0.02%-0.06%-0.09%-0.12%0.07%
CHF-0.07%-0.06%-0.08%-0.13%-0.15%-0.17%-0.07%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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