USD/CAD posts modest gains above 1.4000, Canadian CPI data in focus

• USD/CAD gains ground to around 1.4020 in Tuesday's Asian session.
• The rising geopolitical risks support the USD. 
• The Canadian CPI inflation report will be in the spotlight on Tuesday. 

The USD/CAD pair trades in positive territory near 1.4020 on Tuesday during the Asian trading hours. The resurgence of geopolitical tensions in the Middle East and in the Russia-Ukraine front boost the safe-haven currency like the Greenback. Investors will closely watch Canada's Consumer Price Index (CPI) inflation data, which is due later on Tuesday.

Citing two US officials familiar with the decision, CNN News reported on Sunday that US President Joe Biden's administration has authorized Ukraine to use US arms to strike inside Russia in a significant reversal of Washington's policy in the Ukraine-Russia conflict. Investors will monitor the development surrounding geopolitical risks. Any signs of escalation could lift the US Dollar (USD) against the Loonie. 

Additionally, markets expect that Donald Trump's administration will reignite inflation and slow the path of rate cuts from the Federal Reserve (Fed). This, in turn, contributes to the USD's upside. Futures markets hint at 58.7% odds of a Fed rate cut in December, though expectations for rate cuts through 2025 have moderated to 77 basis points (bps).

On the Loonie front, the Canadian CPI inflation is expected to rise to 1.9% YoY in October from 1.6% in the previous reading, while the monthly CPI is estimated to show an increase of 0.3%. Any signs of hotter inflation in the Canadian economy could lift the Canadian Dollar (CAD) and act as a headwind for USD/CAD.