USD/CAD auctions lackluster below 1.2900 as DXY steadies, oil below $100.00

• The performance of the USD/CAD pair has remained vulnerable despite a confident pullback in DXY.
• The higher inflation rate reported by Statistics Canada accelerates hawkish BOC bets.
• Oil prices are facing barricades around $100.00 as recession fears escalate.

The USD/CAD pair is displaying a lackluster performance in the early Asian session, following the footprints of the US dollar index (DXY). The asset is juggling in a minute range below the critical hurdle of 1.2900. It is worth noting that a stronger pullback in the DXY on Wednesday failed to bring a parallel pullback in the USD/CAD pair. This indicates that the loonie bulls have gotten stronger on escalated hawkish Bank of Canada (BOC) bets after the release of the inflation rate.

On Wednesday, Statistics Canada reported the plain-vanilla Consumer Price Index (CPI) at 8.1%, higher than the prior release of 7.7% but remained lower than the consensus of 8.4%. The monthly inflation rate slipped firmly to 0.7% vs. 0.9% expected and 1.4% the prior release. Also, the core CPI that doesn’t inculcate volatile food and oil prices remained lower than the estimates of 6.7% at 6.2% and 10 basis points (bps) higher than the former figure.

Although the price pressure remained lower than the estimates but still remains higher than the prior figures and doesn’t show any sign of exhaustion.  This keeps the odds of more jumbo rate hikes by the BOC alive. Currently, the BOC’s interest rate stands at 2.5% after the 100 bps rate hike last week.

Meanwhile, the US dollar index (DXY) is holding itself above 107.00 after a pullback move. The asset picked bids after testing Tuesday’s low around 106.40 with lower selling pressure.  This week, the focus will remain on the S&P PMI data, which is expected to remain subdued.

On the oil front, oil prices are facing barricades continuously around the psychological resistance of $100.00. It seems that investors have started underpinning the recession fears against the supply worries as western central banks are shifting into a new leg of raising interest rates. Price pressures have not delivered a meaningful exhaustion signal yet, which indicates more policy tightening measures are ahead.