CAD Holds Firm Ahead of US CPI Release

The Canadian Dollar is holding its ground against the US Dollar as investors await Wednesday's US Consumer Price Index (CPI) data, which will provide insight into the Federal Reserve's interest rate path. The USD/CAD pair has been under pressure for a third straight day but lacks follow-through selling due to a firm US Dollar.

Oil prices remain volatile, with West Texas Intermediate trading around $81.50, up over 5% this week. Elevated oil prices continue to threaten the inflation outlook, reinforcing expectations of tight monetary policy from major central banks.

TD Securities predicts that the Bank of Canada will keep interest rates unchanged at 2.25% through 2026 before a return to neutral at 2.75% next year. The bank notes that while oil prices have largely normalized after the US-Iran conflict, they have still introduced a meaningful shock to the inflation outlook.