USD/CAD treads waters above 1.3550 to retrace recent losses, US CPI eyed

USD/CAD trades higher around 1.3560 during the European session on Wednesday, attempting to halt a three-day losing streak. The rebound in US Dollar (USD) helps the pair to register gains.

Western Texas Intermediate (WTI), Crude oil price continues to gain ground, trading higher around $88.70 per barrel at the time of writing. The black gold is holding firm near a 10-month high and continuing to receive strong support due to concerns about tightening global supplies.

This tightening supply situation is compounded by deeper supply cuts announced by Saudi Arabia and Russia, the world's two largest oil producers, for the remainder of 2023, which continues to bolster oil prices.

The bullish oil prices are providing strong support to the commodity-linked Canadian Dollar (CAD). Additionally, the recent subdued performance of the US Dollar (USD) acted as a headwind for the USD/CAD pair. These factors collectively contribute to the strength of the Loonie pair.

US Dollar Index (DXY) retraces the losing streak, which assesses the performance of the US Dollar (USD) against a basket of the other major six currencies. Spot price beats higher at around 104.80 due to the improved US treasury yields, coupled with market caution ahead of the inflation data releases from the United States (US).

US Consumer Price Index (CPI) is expected to improve by 0.5% on a monthly basis from the previous reading of a 0.2% rise. Moreover, the Core CPI figure is anticipated to remain steady at 0.2%. The rise in inflation could reinforce the prevailing hawkish sentiment surrounding the US Federal Reserve (Fed).

The inflation figures have the potential to offer a more precise understanding of inflation trends within the US economy, and they can wield considerable influence over market sentiment and trading choices concerning the USD/CAD pair.

The market expects that the Fed will further tighten monetary policy by attempting another 25 basis points hike through the end of the year 2023. Additionally, the Greenback bulls are cheering the likelihood of interest rates to remain higher for an extended period.