USD/CAD loses ground below 1.3650 ahead of US housing data

• USD/CAD trades in negative territory near 1.3635 amid the USD weakness. 
• The Canadian CPI data showed an easing in inflationary pressure. 
• US Retail Sales for September rose by 0.7% MoM, beating the market consensus.
• Investors await the US housing data, Canadian Retail Sales data due later this week.

The USD/CAD pair edges lower after retracing from the 1.3700 barrier during the Asian trading hours on Wednesday. A rally in oil prices and a softer US Dollar (USD) weigh on the pair. At the press time, USD/CAD is losing 0.10% on the day to trade at 1.3635.

On Tuesday, Statistics Canada revealed that the nation’s headline Consumer Price Index (CPI) decelerated to 3.8% YoY in September from 4% in the previous month, meeting the market expectation. The BoC CPI, which excludes volatile food and energy prices, surged 2.8% in September versus 3.3% prior. 

The figures showed an easing in inflationary pressure in the Canadian economy. The market anticipates the Bank of Canada (BoC) to maintain the interest rate for the remainder of the year. Meanwhile, a rally in oil prices undermines the commodity-linked Loonie as the country is the leading oil exporter to the US.

On the USD front, US Retail Sales for September rose by 0.7% MoM, beating the market consensus of 0.3%. Retail Sales Control Group climbed 0.6% MoM versus 0.2% prior. The data suggest strong momentum in consumption. The Greenback initially attracted some buyers on the back of the upbeat US data on Tuesday, but the impact was short-lived. However, higher US Treasury yields might cap the downside of the USD and act as a tailwind for the USD/CAD pair.

Minneapolis Federal Reserve Bank President Neel Kashkari stated on Tuesday that inflation has taken considerably longer than expected and is still too high. Philadelphia Fed President Patrick Harker said the Fed should hold rates steady. Traders will take more cues from the Fed officials on Wednesday, including Waller, Williams, and Bowman, which might offer some hints about further monetary policy paths.

Market participants will keep an eye on the US Housing Starts and Building Permits on Wednesday. On Friday, the Canadian Retail Sales for August will be released. These figures could give a clear direction to the USD/CAD pair.