USD/CAD edges lower below 1.4000 on softer US Dollar, eyes on US hard data

• USD/CAD softens to around 1.3975 in Thursday's early Asian session. 
• US April CPI inflation came in cooler than expected, weighing on the US Dollar. 
• Fed is expected to deliver gradual rate cuts starting later in the year. 

The USD/CAD pair loses ground to near 1.3975 during the early Asian session on Thursday, pressured by a weaker US Dollar (USD). The US Retail Sales and Producer Price Index (PPI) for April will be the highlights later on Thursday, along with the speech from the Fed's Chair Jerome Powell. 

Tamer-than-expected US April inflation weighs on the Greenback against the Canadian Dollar (CAD). The US Consumer Price Index (CPI) increased by 2.3% YoY in April, compared to a rise of 2.4% in March, according to the US Bureau of Labor Statistics (BLS) on Tuesday. This reading came in below the market expectation of 2.4% and registered the smallest year-over-year gain in more than four years. 

However, signs of de-escalation of a US-China trade war and easing fears of recession in the United States have prompted traders to raise their bets that the Fed policymakers will deliver gradual rate cuts later in the year instead of taking earlier. This, in turn, could provide some support to the US Dollar. Markets have dialed back expectations for rate cuts from the Fed this year, pricing in a 74% odds for the first cut of at least 25 basis points (bps) at the September meeting, according to LSEG data, compared with the prior view for a cut in July.

Meanwhile, a decline in Crude Oil prices might drag the commodity-linked Loonie lower and create a tailwind for the pair. It's worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.