USD/CAD looks to close below 1.33 after Canadian CPI data, FOMC minutes

The USD/CAD pair dropped to a daily low of 1.3253 in the early trading hours of the American session after Statistics Canada released its inflation report. Although the pair lost its bearish momentum in the remainder of the session, it remains on track to close the day in the negative territory. As of writing, the pair was down 0.22% on the day at 1.3285.

CPI data lifts CAD on Wednesday

The Consumer Price Index (CPI) in July remained unchanged at 2% on a yearly basis in July and came in higher than the market expectation of 1.7%. More importantly, this data suggested that the Bank of Canada could refrain from cutting its policy rate and provided a boost to the Loonie.

Commenting on the data, however, TD Securities analysts argued that the Bank of Canada (BoC) could look through the upside surprise partly due to the fact that the challenges confronting the Canadian economy are external in nature. 

"If the global economy slows markedly, the Bank of Canada will be forced to provide stimulus even with buoyant mid-year price pressures," analysts said.

Meanwhile, after rising to a weekly high of $57.43 earlier in the day, the barrel of West Texas Intermediate reversed its direction and settled 0.8% lower to make it difficult for the commodity-related CAD to continue to gather strength against its American counterpart.

On the other hand, the minutes of the FOMC's July 30-31 meeting today revealed that a couple of policymakers favoured a 50 basis point rate cut but also said that most policymakers viewed the decision to cut the policy rate by 25 basis point as a 'recalibration' of the policy stance. The US Dollar Index is now looking to close the day in the positive territory.

Technical levels to watch for