Dollar Firms Up as Markets Prepare for US CPI Report

The Canadian Dollar (CAD) trimmed its gains on Wednesday, as the US Dollar (USD) firmed up across the board. The USD/CAD pair has gained about 15 pips, returning above 1.3930, but the broader trend remains bearish after losing more than 1% in two weeks.

Investors are bracing for the US Consumer Price Index (CPI) report due later in the day, which is expected to provide further insight into the Federal Reserve's near-term monetary policy path. Analysts at ING note that markets are already positioned for a 'softer price story' and that 'we would probably need to see a 0.1% month-on-month read on core inflation...to drag market pricing of a September Fed rate hike away from a 50% probability in favour of no change.'

The USD is drawing additional support from higher safe-haven demand amid flaring tensions in the Middle East. The Canadian Dollar, however, remains supported by higher Oil prices, which are acting as headwinds for USD/CAD rallies.