USD/CAD weakens to near 1.4350 on cooler-than-expected US PPI inflation data

• USD/CAD softens to near 1.4350 in Wednesday's early Asian session. 
• US inflation is still slowing as the PPI came in below expectations in December.
• Higher crude oil prices support the commodity-linked Loonie. 

The USD/CAD pair remains on the defensive around 1.4350 during the early Asian session on Wednesday, pressured by the disappointing US December Producer Price Index (PPI) data. Market participants will keep an eye on the US Consumer Price Index (CPI) inflation data, which is due later on Wednesday. Also, the Federal Reserve's (Fed) Thomas Barkin, Neel Kashkari, John Williams, and Austan Goolsbee are set to speak.

The US Dollar (USD) weakens against the Loonie after cooler-than-expected PPI inflation data. Data released by the Bureau of Labor Statistics on Tuesday showed that PPI for final demand rose 0.2% MoM in December after an unrevised 0.4% advance in November, softer than the 0.3% expected. The PPI climbed 3.3% YoY in December, the most since February 2023, after increasing 3.0% in November. This reading came in below the consensus of 3.4%. 

However, the threat of tariffs by President-elect Donald Trump's incoming administration and the prospect of fewer Fed rate cuts could lift the US Treasury yields and support the USD. "The risks are for less cuts ... but we expect continued progress on the inflation front could keep the Fed on track to deliver a rate cut at the March meeting," said Matthew Martin, a senior U.S. economist at Oxford Economics.

On the other hand, a rise in crude oil prices amid wider United States (US) sanctions on Russian oil boosts the commodity-linked Loonie and creates a headwind for the pair. It's worth noting that Canada is the largest oil exporter to the United States (US), and higher crude oil prices tend to have a positive impact on the CAD value.​