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• USD/CAD posts modest gains near 1.3685 in Thursday’s early Asian session. 
• Canadian inflation rose to 1.9% in June, reducing expectations for BoC rate reductions. 
• The US PPI inflation was unchanged in June, softer than expected. 

The USD/CAD pair trades with mild gains around 1.3685 during the early Asian session on Thursday. The reduced bets on Bank of Canada (BoC) interest rate cuts provide some support to the Canadian Dollar (CAD). Traders will keep an eye on the US Retail Sales for June, followed by weekly Initial Jobless Claims and Philly Fed Manufacturing Index due later on Thursday.

Canada’s inflation, as measured by the Consumer Price Index (CPI), rose to 1.9% YoY in June from 1.7% in May, Statistics Canada data reported Tuesday. Economists broadly expect that the new report will make a BoC interest rate cut on July 30 unlikely. Investors see a 5% possibility that the Canadian central bank cuts its benchmark interest rate from the current rate of 2.75% at the July meeting, down from a 14% chance before the Canadian CPI report. 

On the USD’s front, the Producer Price Index (PPI), a measure of wholesale costs, was unexpectedly unchanged in June. This figure came in below the market consensus of 0.2%. Meanwhile, the core PPI rose by 2.6% YoY in June versus 3.0% prior, softer than the 2.7% expected. 

The wholesale inflation report supports expectations that the US Federal Reserve (Fed) will leave its benchmark overnight interest rate unchanged in the 4.25%-4.50% range at its July policy meeting. Fed officials said they remain cautious about the impact tariffs will have on inflation and believe the US economy is in the right position now that they can wait to see the impacts before making the next move. The cautious stance of the Fed could underpin the Greenback against the Loonie in the near term. 

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