USD/CAD advances towards 1.2650 on subdued oil prices, US CPI eyed

The USD/CAD pair managed to establish above 1.2600 on Monday after multiple failed attempts last week. The asset is advancing sharply towards 1.2650 as subdued oil prices have dented the optimism of the loonie. The major has extended its gains on Tuesday after overstepping Monday’s high at 1.2641.

Oil prices have tumbled around 3% on Monday amid a push of 240 million barrels of oil supply through the collective effort of the US administration and the International Economic Agency (IEA) in the next six months. The market participants will figure out the extent to which the additional oil will offset the prohibited Russian oil after sanctions on the latter.

The release of Strategic Petroleum Reserve (SPR) volumes is equivalent to 1.3 million barrels per day (bpd) over the next six months, which is enough to offset a shortfall of 1 million bpd of Russian oil supply, analysts at JP Morgan said.

Meanwhile, the lockdown curbs in China to contain the Covid-19 have restricted the movement of men, materials, and machines. This has dampened the demand of oil in a country, which carries the tag of the biggest importer of oil.

Canada, being the largest exporter of oil to the US is facing the heat of lesser cash flows amid falling crude prices.

Going forward, investors will focus on the US Consumer Price Index (CPI), which is due on Tuesday. The US inflation is likely to print a fresh multi-decade high at 8.5%. Apart from that, the Bank of Canada (BOC) will dictate its interest rate decision on Wednesday. The BOC is expected to push its interest rates by 50 basis points.