USD/CAD drifts lower to 1.3470, investors await US Retail Sales data

• USD/CAD loses traction near 1.3468 on the softer USD. 
• The upbeat US CPI data might keep the Fed waiting until the summer before starting to cut rates.
• Markets believe the BoC will not move aggressively on interest rates. 
• Investors will focus on the Canadian Manufacturing Sales and the US Retail Sales, due on Thursday. 

The USD/CAD pair trades in negative territory for a second consecutive day during the early Asian session on Thursday. The US Dollar (USD) resumes its decline below the 103.00 mark and drags the pair lower. Investors await the US Retail Sales data on Thursday for fresh impetus, which is projected to rise 0.8% MoM in February. At press time, USD/CAD is trading at 1.3468, down 0.02% on the day. 

The hotter-than-expected US inflation data earlier this week might keep the Federal Reserve (Fed) on course to wait at least until the summer before starting to lower interest rates. The headline CPI rose 3.2% YoY from January’s reading of 3.1%, while the Core CPI ticked lower to 3.8% YoY from the previous reading of 3.9%. Market players will take more cues from US February Retail Sales data as it might influence the Fed’s next move in its March meeting scheduled for next week. The stronger report might convince the Fed to focus on more data and allow policymakers to avoid having to rush to cut rates, which might lift the US Dollar (USD) and create a tailwind for the USD/CAD pair. 

On the other hand, the Bank of Canada (BoC) left the interest rate unchanged earlier this month, as largely expected by the market. The BoC’s governor Tiff Macklem highlighted that lowering inflation close to target is the central bank’s priority. The markets anticipate that the BoC will not move aggressively or cut rates until after the Fed, which might be the upside potential for the Canadian Dollar (CAD) in the coming months.

Meanwhile, the rise in crude oil prices might boost the commodity-linked Loonie for the time being, as Canada is the largest oil exporter to the United States (US).

Moving on, the Canadian Manufacturing Sales is due on Thursday. On the US docket, traders will keep an eye on the US Retail Sales data for February, along with the Producer Price Index (PPI), Business Inventories, and usual weekly Initial Jobless Claims.