Canadian Dollar holds steady after CPI inflation uptick

• The Canadian Dollar covered little ground on Tuesday, holding flat against the Greenback.
• Canadian CPI inflation rose in January, with core CPI metrics climbing more than expected.
• The Loonie remains hampered near key technical levels as bullish momentum evaporates.

The Canadian Dollar (CAD) traded blows with the US Dollar (USD) on Tuesday, keeping USD/CAD stead near the 1.4200 handle as Loonie traders try to hang onto their recent gains. Canadian Consumer Price Index (CPI) inflation figures came in as-expected, though there was an acceleration in Bank of Canada (BoC) core CPI metrics.

Canadian headline CPI inflation rose slightly in January, matching median market forecasts but not rising significantly enough to threaten the BoC's current stance on rate cuts. However, core CPI inflation as tracked by the BoC also accelerated to an 11-month high, which could put pressure on the Canadian central bank to slow its pace of rate cutting through the remainder of the year.

Daily digest market movers: Canadian Dollar flatlines on mixed inflation prints

• Canada's headline CPI inflation print rose to 1.9% YoY, matching forecasts and ticking up from the previous print of 1.8%.
• Core BoC CPI inflation accelerated to 2.1% YoY, climbing from the previous 1.8% as core prices accelerated at their fastest pace in nearly a year.
• Core BoC CPI inflation growth was almost entirely front-loaded, with January's MoM figure rising to 0.4% from the previous -0.3% contraction.
• Rate differentials continue to matter heavily for USD/CAD, and traders will be watching for the latest Meeting Minutes from the Federal Reserve (Fed), due on Wednesday.
• Loonie markets are largely huddled around possible tariffs looming ahead. US President Donald Trump's plans for sweeping tariffs against all of the US' key trading allies have been kicked down the road to April, but the looming threat has hampered trending activity in currency markets.

Canadian Dollar price forecast

The Canadian Dollar continues to hang onto recently-gained ground, keeping USD/CAD pressed into neutral-to-bearish territory at the 1.4200 handle. Price action remains trapped below the 50-day Exponential Moving Average (EMA) near 1.4280, but further downside remains hampered by a general lack of bullish momentum behind the Loonie.

USD/CAD daily chart