USD/CAD stabilizes above 1.3000 as market mood soars, focus is on Canada’s Inflation

• USD/CAD is hovering above 1.3000 despite a decent slippage in the DXY.
• A preliminary estimate for Canada's inflation is 8.8% vs. 7.7% reported prior.
• Declining oil prices have weakened the loonie bulls.

The USD/CAD pair is oscillating in a narrow range of 1.3006-1.3023 in the Asian session. The asset is displaying a subdued performance amid a recovery in the risk appetite of the market participants. One concern that demands attention from investors is that the US dollar index (DXY) is dropping significantly while the USD/CAD pair has displayed a negligible fall. This indicates that loonie is also weaker and the asset is auctioning lackluster.

Weakness in the Canadian dollar could be tagged to higher estimates for Canada’s inflation rate. The economic data is due on Wednesday and the market consensus for the inflation rate is 8.8%, significantly higher than the former release of 7.7%. The inflation rate in the Canadian economy is soaring like there is no tomorrow. It is hurting the paycheck of the households principally.

Meanwhile, the US dollar index (DXY) has violated Friday’s low at 107.92 as the market mood has turned positive. Investors are expecting that the price pressures in the US are reaching their peak levels. However, St. Louis Federal Reserve Bank President James Bullard said on Friday warned that inflation could surprise to the upside.

On the oil front, oil prices are declining strongly amid soaring recession fears. Major central banks are focusing on bringing price stability to their economy. For that, policy tightening measures are highly required to contain the inflation mess. This is hurting the market sentiment as demand forecasts for oil have trimmed significantly. It is worth noting that Canada is the largest exporter of oil to the US and lower oil prices have weakened the loonie bulls.