The Canadian Dollar weakened on Tuesday as the US Dollar nonstop to attract safe-haven demand pushing USD/CAD higher near 1.3760, up 0.17% during the session. Despite stronger Oil prices the Canadian currency stumbled to gain support.
West Texas Intermediate (WTI) Oil traded around $102.70, marking a 0.60% increase for the day. Since Canada is a major energy seller rising oil prices usually provide support to the Canadian Dollar. However broader market emotion limited those gains.
Fresh inflation data from Canada showed price growth picked up in April. The Consumer Price Index (CPI) increased 2.8% year-over-year compared to 2.4% in the previous reading. While inflation moved higher the result was just below market forecasts. On a monthly basis CPI rose 0.4%.
At the same time the Bank of Canada selected core inflation measure pointed to easing price pressures. BoC Core CPI slowed to 2.1% from 2.5% earlier suggesting that although inflation remains somewhat persistent the overall trend continues to moderate.
Meanwhile the US Dollar stayed firm as investors looked for safer assets amid rising geopolitical tensions linked to Iran. Reports of explosions on Iran Qeshm Island and concerns over shipping activity through the Strait of Hormuz increased worries about potential disruptions to global energy supplies.
US economic data also supported the Greenback. The ADP Employment Change report indicated stronger hiring activity with private employers adding an average of 42.25K jobs per week in early May compared with 33K previously.
Although Oil prices moved higher stronger demand for the US Dollar and Canadian inflation data that failed to significantly change expectations for Bank of Canada policy continued to support gains in USD/CAD.
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