USD/CAD holds positive ground above the 1.3500 mark, focus on FOMC Minutes

The USD/CAD pair gains ground above the 1.3500 mark during the early Asian trading hours on Wednesday. A weaker-than-expected Canadian inflation data weighs on the Canadian Dollar (CAD) and acts as a tailwind for USD/CAD. The attention is shifted to the FOMC Meeting Minutes on Wednesday. The pair currently trades near 1.3526, up 0.03% on the day. 

Statistics Canada revealed on Tuesday that the nation’s Consumer Price Index (CPI) climbed 2.9% YoY in January from a 3.4% rise in December, below the market consensus of 3.3%. The inflation data eased into the central bank’s control range for the first time since June, and it might convince the Bank of Canada (BoC) to start considering rate cuts in the coming months.

Meanwhile, the oil prices face some profit-taking and retraces from the three-month highs, which might exert some selling pressure on the commodity-linked Loonie as Canada is the largest oil exporter to the United States (US). 

On the other hand, the stronger-than-expected US Consumer Prices Index and Producer Price Index (PPI) last week trimmed hope for a rate cut from the Federal Reserve (Fed) in March. Traders have priced in a 60% odds of no rate cut in the May meeting, while pricing in an 80% chance of at least a 25 basis point (bps) cut in June, according to the CME FedWatch Tool.  

Market players will closely watch the FOMC Meeting Minutes, due later on Wednesday. The Canadian Retail Sales for December will be due on Thursday, which is expected to improve to 0.8% MoM versus the previous reading of a 0.2% decline.