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• USD/CAD drifts lower to 1.3925 in Wednesday’s early Asian session. 
• US CPI inflation declined to 2.3% in April, cooler than expected.
• Optimism from US-China trade deals might help limit the pair’s losses. 

The USD/CAD pair weakens to near 1.3925 during the early Asian session on Wednesday. The US Dollar (USD) edges lower against the Canadian Dollar (CAD) after inflation data came in below market expectations.

Data released by the US Bureau of Labor Statistics (BLS) on Tuesday showed that the Consumer Price Index (CPI) increased by 2.3% on a yearly basis in April, compared to a rise of 2.4% in March. This reading came in below the market expectation of 2.4%. The Greenback has softened in an immediate reaction to the cooler-than-expected inflation report. 

Meanwhile, the core CPI, which excludes volatile food and energy prices, climbed 2.8% on a yearly basis in April, compared to the previous reading and the estimation of 2.8%. On a monthly basis, the CPI and the core CPI both rose by 0.2% in April.

However, optimism that a tariff deal between the United States (US) and China could cool the trade war between the world's two largest economies, prompting traders to dial back odds of a recession. This, in turn, provides some support to the USD in the near term. 

On the Loonie front, extended gains in Crude Oil prices might lift the commodity-linked CAD and cap the upside for the pair. It’s worth noting that Canada is the largest oil exporter to the US, and higher crude oil prices tend to have a positive impact on the CAD value. 

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