USD/CAD remains on the defensive near the 1.3170 mark amid the weakening USD

• USD/CAD remains on the defensive near the 1.3170 mark.
• The Canadian Consumer Price Index (CPI) fell to 2.8% YoY in June versus 3.4% prior.
• The US Industrial Production data for June surprises the downside.

The USD/CAD pair remains under pressure and currently trades around 1.3160 regions in the early Asian session. The weakening US Dollar is backed by the Industrial Production surprises to the downside and the softer inflation data last week. Investors will look to the Canadian Retail Sales m/m for fresh impetus.

The Canadian Consumer Price Index (CPI) fell to 2.8% YoY in June, down from 3.4% in May. This number was lower than the market's expectation of 3%. The CPI rose 0.1% MoM, compared to market expectations of a 0.3% increase. Additionally, the monthly Core CPI, which excludes volatile food and energy prices, fell 0.1%, while the annual Core CPI stood at 3.2%, down from 3.7% in May.

The softer Canadian core inflation exerts some pressure on the Loonie as the data lowers the possibility that the Bank of Canada (BoC) will raise interest rates at its September meeting. Nevertheless, the Canadian Dollar (CAD) recovers against the US Dollar. A reversal in crude oil prices help limit the loss in the commodity-linked Loonie and weighed on the USD/CAD pair.

Additionally, the release of US Industrial Production data for June surprises to the downside and shows a prolonged decline of industrial output. On Tuesday, the US Federal Reserve reported that Industrial Production fell 0.5% in June for the second month. This figure was lower than the market expected of no change. 

Also, Retail sales in the United States increased 0.2% MoM in June to $689.5 billion, according to data released by the US Census Bureau. This report came in below the market's forecast of a 0.5% gain. On the positive side, the 0.3% growth figure recorded in May was revised up to 0.5%. 

Looking ahead, the Canadian Retail Sales m/m will be keenly watched. The softer data might cap the downside for the USD/CAD pair. On the US docket, the Unemployment Claims will be released on Thursday.