USD/CAD is trading little changed on Thursday, holding near the 1.3800 handle after posting modest gains in the previous session. The pair is hovering around 1.3790 during Asian trading hours, with the US Dollar finding support from cautious market positioning ahead of the delayed release of US Consumer Price Index data later in the day.
The upcoming CPI report is expected to provide clearer insight into the trajectory of US inflation and its implications for Federal Reserve policy. As a result, traders are reluctant to place aggressive directional bets, keeping price action subdued in the near term.
Federal Reserve Governor Christopher Waller, who is considered a potential successor to Chair Jerome Powell, reiterated his dovish stance during a CNBC forum. Waller noted that with inflation still elevated, policymakers can afford to move gradually, adding that there is “no rush” to lower rates and that policy can be eased steadily toward a neutral setting.
Market expectations continue to favor a cautious Fed. According to the CME FedWatch tool, Fed funds futures are currently pricing in a 75.6% probability that the central bank will keep interest rates unchanged at its January meeting, up from nearly 74% a week earlier.
On the Canadian Dollar side, pressure is building as oil prices weaken. As a commodity-linked currency, the loonie tends to track crude oil movements, and the decline in prices is offering some support to USD/CAD. West Texas Intermediate crude is trading near $56.00 per barrel at the time of writing.
That said, the downside in oil prices may be limited by rising geopolitical risks. The United States has ordered a complete halt to maritime traffic involving sanctioned oil tankers traveling to and from Venezuela. In parallel, Washington is pushing for tighter sanctions on Russia’s energy sector as part of efforts to support peace negotiations over Ukraine. These developments have heightened concerns about potential disruptions to global energy supply, which could cap further losses in crude prices and, in turn, influence CAD dynamics.
