USD/CAD juggles around 1.3450 as investors await Canada’s Inflation and Retail Sales data

• USD/CAD is displaying a rangebound auction ahead of Canada’s CPI and Retail Sales data.
• The market mood is extremely quiet despite escalating geopolitical tensions.
• Higher consumer spending could force the BoC ahead to reassess the monetary policy.

The USD/CAD pair is demonstrating a rangebound performance around 1.3450 in the early Tokyo session. The Loonie asset has turned sideways as investors are awaiting the release of Canada’s Consumer Price Index (CPI) and the Retail Sales data for fresh cues.

The sideways auction in the Loonie asset is also backed by the lackluster US Dollar Index (DXY). The USD Index remained topsy-turvy as United States markets were closed on Monday due to Presidents’ Day. An elongated weekend pushed investors to the sidelines before making a significant move. The market mood was extremely quiet despite escalating geopolitical tensions. S&P500 futures displayed sheer volatility as US-China tensions escalated after the US ambassador warned China for providing lethal support to Russia in the invasion of Ukraine.

Going forward, the release of Canada’s Inflation and Retail Sales data will keep the Canadian Dollar in action. As per the consensus, Canada’s core CPI that excludes oil and food prices is seen higher at 5.5% vs. the former release of 5.4% on an annual basis. While the annual headline inflation is seen lower at 6.1% against 6.3% released earlier.

It is worth noting that the Bank of Canada (BoC) has announced a pause in the continuation of policy tightening after pushing interest rates to 4.5%. BoC Governor Tiff Macklem believes that the monetary policy is restrictive enough to tame the stubborn inflation for now.

Apart from the inflation figures, monthly Retail Sales will remain in focus, which is seen at 0.2% against a contraction of 0.1% released in the prior period. This indicates that consumer spending is coming back despite higher interest rates by the BoC. It could force the BoC ahead to reassess the monetary policy as higher consumer spending could propel wholesale inflation ahead.

Meanwhile, oil prices are aiming to reclaim the $78.00 resistance after Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said on Monday, “OPEC+ is flexible enough to change decisions whenever required.” It is worth noting that Canada is a leading exporter of oil to the United States and higher oil prices would support the Canadian Dollar ahead.