USD/CAD rose for a fourth day and traded near 1.3628 as the US Dollar stayed strong. Trading was quiet and range-bound because of thin holiday liquidity from US President’s Day and Canada’s Family Day.
Markets are focused on Canada’s January CPI on Tuesday. Forecasts are 0.1% month-on-month after -0.2% in December, and 2.4% year-on-year, unchanged.
Bank Of Canada Policy Outlook
In January, the Bank of Canada said its policy aims to keep inflation near 2%. It also said the current policy rate “remains appropriate”. However, it noted risks from trade uncertainty linked to US tariffs.
Oil prices gave the Canadian Dollar some support. WTI traded near $63.25, up almost 1.0% on the day.
In the US, expectations for rate cuts eased after labour data pointed to steadier conditions. Nonfarm Payrolls rose by 130K after 48K, and unemployment fell to 4.3% from 4.4%.
US inflation data was softer. CPI was 0.2% MoM in January versus 0.3% in December, and 2.4% YoY versus 2.7%. Traders still price more than 50 bps of cuts in 2026, while DXY held near 97.00.
Upcoming Risk Events
Next up are the FOMC minutes on Wednesday, then core PCE and Q4 GDP on Friday.
USD/CAD is still edging higher, holding near 1.3550 in quiet trading. With holidays in both the US and Canada, low volume is keeping the pair in a tight range. This lull may not last, with key data due later this week.
The main focus is Canada’s inflation report on Tuesday. Recent data showed Canada added a stronger-than-expected 37,000 jobs in January 2026. But wage growth has been cooling, which leaves the outlook mixed for the Bank of Canada. If CPI comes in above the current 2.8% annual rate, the BoC may delay any rate cuts. That would likely support the loonie.
The US Dollar is also finding support as markets scale back expectations for deep Federal Reserve rate cuts. The January 2026 jobs report showed a solid 190,000 payroll gain, and last week’s CPI was slightly firm at 3.2%. That is a reminder that inflation may take time to return to 2%, and it gives the Fed room to stay patient.
This is different from early 2025. Back then, markets priced in more than 50 basis points of Fed cuts for the year, while inflation cooled to 2.4%. The dollar also faced pressure from trade policy uncertainty, which has since eased.
Higher oil prices are helping to limit losses in the Canadian dollar. With WTI holding above $85 a barrel, supported by OPEC+ supply discipline and steady global demand, oil remains a key tailwind for Canada’s currency. This helps offset the underlying strength in the greenback.
With volatility possible around the upcoming data, buying options may help protect against sharp moves. A USD/CAD straddle ahead of Tuesday’s CPI release could be a way to position for a breakout in either direction. For now, resistance looks near 1.3600. But a stronger-than-expected inflation print could pull the pair back toward support around 1.3450.
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