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The USD/CAD pair trades with mild losses around 1.3955 during the early Asian session on Wednesday. The hotter-than-expected Canadian inflation report for October supports the Canadian Dollar (CAD) against the Greenback. However, the renewed geopolitical tensions between Russia and Ukraine might cap the pair’s downside.
Reuters reported late Tuesday that Ukraine used US ATACMS to strike Russian territory for the first time, marking a significant uptick in hostilities on the 1,000th day of the conflict. The immediate reaction in markets faded when Russian Foreign Minister Sergei Lavrov said that the government would “do everything possible” to avoid the onset of nuclear war. The US said that it had not adjusted its nuclear posture in response. Investors will closely monitor the developments surrounding the geopolitical risks. Any signs of escalation could boost the safe-haven flows, benefiting the Greenback.
On the Loonie front, traders trim their bets on a jumbo rate cut by the Bank of Canada (BoC) in December after Canada’s annual inflation rate rose more than expected in October. Data released by Statistics Canada on Tuesday showed that the country’s Consumer Price Index (CPI) rose by 2.0% YoY in October, compared to a 1.6% gain in September, hotter than the market expectations of a 1.9% increase. On a monthly basis, the CPI increased by 0.4% versus -0.4% prior and above the market consensus of 0.3%.
The markets are now pricing in nearly 26% odds of a 50 basis point (bps) rate cut by the BoC next month, down from 37% before the CPI data release. Traders will take more cues from the Canadian Gross Domestic Product (GDP) data next week and employment data early next month, which might influence the BoC’s decision on the size of the rate reduction.More By This Author:USD/CAD Posts Modest Gains Above 1.4000, Canadian CPI Data In Focus EUR/JPY Attracts Some Buyers To Near 163.00 Amid BoJ Rate Hike Uncertainty Gold Price Extends Decline On Bullish US Dollar, Investors Brace For US PPI Data
