• USD/CAD is stating above 1.3000 amid uncertainty over the release of the US CPI and core CPI.
• The yearly US inflation is seen at 8.1% while the core CPI may edge lower to 6%.
• Falling oil prices are hurting the cash inflows for Canada and henceforth the demand of loonie.

The USD/CAD pair has renewed its fresh yearly high at 1.3052 and is balancing above the psychological resistance of 1.3000. The asset managed to continue its winning streak by turning positive on Tuesday and is likely to advance further amid uncertainty over the release of the US Consumer Price Index (CPI) in the New York session.

The greenback has been performing strongly against loonie as investors are expecting that a figure of US inflation above 8% would bolster the odds of a 75 basis point (bps) interest rate hike by the Federal Reserve (Fed) in June. The yearly US CPI is likely to edge lower to 8.1% against the multi-decade high figure of 8.5%. While the Core CPI, which doesn’t include food and energy prices, is expected to shift lower to 6% from the prior print of 6.5%. This may ease out the aggressive stance from the Fed a little but a jumbo rate hike announcement will remain on the cards. The US dollar index (DXY) is likely to recapture its 19-year high at 104.19 ahead of the US inflation.

On the oil front, lower fossil fuel prices are also underpinning the greenback against the Canadian dollar. Oil prices settled below the psychological support of $100.00 on Tuesday as higher interest rates will absorb liquidity from the economy, which may result in lower aggregate demand. It is worth noting that Canada is the biggest exporter of oil to the US and lower oil prices result in lower cash inflows for Canada. Also, the Covid-19 restrictions in China are hurting the oil demand due to restrictions on the movement of men, materials, and machines.