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  • USD/CAD has gauged an intermediate cushion around 1.3380 as focus shifts to Canada’s Inflation.
  • Stubborn US core inflation is still a cause of worry for Fed policymakers.
  • A continuous decline in Canada’s inflation will allow the BoC to keep rates steady.

The USD/CAD pair has gauged an intermediate cushion after a gradual correction to near 1.3380 in the Tokyo session. The Loonie asset needs support for a confident recovery to defend further downside. A supportive move to the Loonie asset has come from the US Dollar Index (DXY), which has also found a cushion near 102.00.

S&P500 futures have generated nominal losses in the Tokyo session after a bullish settlement on Monday, portraying a minor caution in the overall upbeat market mood. Investors should brace for sheer volatility in United States equities as banking stocks will report their quarterly results and any sort of impact of banking turmoil on their asset quality.

Investors seem supportive of the USD Index as the Federal Reserve (Fed) is expected to elevate rates further to tame stubborn inflation. No doubt, US labor market conditions have eased and headline inflation has softened, the core inflation is still persistent and demands more restrictions on the interest rate policy.

The Canadian Dollar is likely to dance to the tunes of Canada’s inflation data. As per the expectations, the headline inflation will decelerate to 4.3% from the prior release of 5.2%. However, the monthly headline figure is seen expanding by 0.6% against an expansion of 0.4%, reported earlier.

Core CPI that excludes oil and food prices would soften to 4.2% vs. the former release of 4.7%. This may allow the Bank of Canada (BoC) Governor Tiff Macklem to continue its unchanged policy stance.

On the oil front, oil prices have attempted a recovery after $81.00 after the release of upbeat China’s Gross Domestic Product (GDP) data. It is worth noting that Canada is the leading exporter of oil to the United States and a recovery in oil prices will support the Canadian Dollar.