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• USD/CAD depreciates as the US Dollar stays on the back foot ahead of the closely watched US CPI release.
• US inflation is expected to rise at an annual rate of 2.6% in March, slightly lower than February’s 2.8% reading. 
• The CAD may come under pressure as Oil prices soften amid renewed demand concerns triggered by escalating US-China trade tensions.

USD/CAD loses ground for the second successive day, trading around 1.4090 during the European hours on Thursday. The pair loses ground as the US Dollar (USD) remains subdued ahead of the high-impact Consumer Price Index (CPI) inflation report for March set to be published on Thursday at 12:30 GMT.

US inflation is set to rise at an annual pace of 2.6% in March, down slightly from the 2.8% reported in February. Core CPI inflation, which excludes the volatile food and energy categories, is expected to ease to 3% in the same period from a year earlier, compared to a 3.1% growth in the previous month.

The Federal Open Market Committee (FOMC) Meeting Minutes suggested that policymakers nearly unanimously agree that the US economy faces the dual risk of rising inflation and slowing growth, warning of “difficult tradeoffs” ahead for the Federal Reserve.

Fed officials continue to downplay the immediate impact of escalating trade tensions, maintaining that policy decisions will remain data-driven. Market participants are now pricing in just a 40% chance of a rate cut at next month’s Fed meeting, according to the CME FedWatch tool.

However, the downside for the USD/CAD pair may be limited as crude Oil prices weaken. West Texas Intermediate (WTI) is trading around $60.20 per barrel, with prices under pressure due to renewed demand concerns stemming from heightened US-China trade tensions.

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