• USD/CAD trades a little changed on Friday despite softer-than-expected US inflation data.
• US CPI misses forecasts, reinforcing expectations that the Fed could resume its rate-cutting cycle later this year.
• Softer Oil prices weigh on the Loonie, with WTI easing to around $62.50.

USD/CAD trades in a tight range on Friday, as the US Dollar (USD) holds firm despite softer-than-expected US inflation data. At the time of writing, USD/CAD is hovering near 1.3625, holding modest gains and remaining on the front foot for a third consecutive day.

US inflation data released earlier showed a softer headline print, reinforcing expectations that the Federal Reserve (Fed) could resume its rate-cutting cycle later this year.

The Consumer Price Index (CPI) rose 0.2% MoM in January, easing from 0.3% in December and undershooting market expectations of 0.3%. On an annual basis, headline CPI slowed to 2.4% YoY from 2.7%, also missing the 2.5% forecast.

Meanwhile, core CPI (excluding food and energy) increased 0.3% MoM, matching expectations and picking up from 0.2% previously, while the core annual rate eased slightly to 2.5% from 2.6%.

Meanwhile, sentiment toward the Canadian Dollar weakened slightly after media reports earlier this week said US President Donald Trump is privately considering withdrawing the United States from the US-Mexico-Canada Agreement (USMCA), although no official confirmation has been issued so far.

Trade risks tied to Trump’s aggressive agenda continue to weigh on Canada’s economic outlook, with added focus on the Supreme Court of the United States, which has set February 20 as its first opinion day in a case related to the legality of Trump-era tariffs.

Softer Oil prices are also weighing on the Loonie, adding mild downside pressure on the Loonie, as lower crude prices usually hurt Canada’s export revenues and reduce demand for the currency. West Texas Intermediate (WTI) crude is trading around $62.56, easing after climbing to a two-week high near $65.64 earlier this week.

Looking ahead, attention now turns to Canada’s CPI data due next week, as traders look for clearer guidance on the policy path of the Bank of Canada, and whether the central bank could raise rates later this year or remain on hold.