USD/CAD made a decisive break below 1.28 on Tuesday. CPI in Canada may help the loonie, according to economists at ING, sending the USD/CAD pair lower to 1.27.

More inflationary pressure in Canada

“Crude and other energy prices remain considerably more elevated than before the Ukraine conflict, and are indeed set to fuel further recovery in the Canadian oil and gas industry, which ultimately bodes well for CAD in the medium-term.”

“Today, we’ll see the February CPI report in Canada, with headline inflation that is expected to accelerate from 5.1% to 5.5%. We think this – along with the Fed’s start of the tightening cycle – should contribute to cementing the market’s expectations that the Bank of Canada will maintain a decent pace (five to six more hikes this year) in raising interest rates, which could endorse the loonie’s good momentum.”

“USD/CAD to re-test 1.2700 today.”