USD/CAD edges up to near 1.4000 even as US Dollar underperforms

• USD/CAD trades slightly higher despite the US Dollar weakens amid soft US PPI data for April.
• The US PPI surprisingly deflated on month, likely encourage Fed officials to cut interest rates.
• Rising Canadian jobless rate boosts BoC dovish bets.

The USD/CAD pair ticks up to near the psychological level of 1.4000 during North American trading hours on Thursday. The Loonie pair trades higher despite the US Dollar (USD) trading lower following the release of the United States (US) Producer Price Index (PPI) data for April.

The US Dollar Index (DXY), which gauges the Greenback's value against six major currencies, is down 0.3% to near 100.70.

The US Bureau of Labor Statistics (BLS) showed that business owners surprisingly reduced prices of goods and services on a monthly basis. Both the headline and core PPI deflated by 0.5% and 0.4%, respectively. On year, the headline PPI rose at a slower pace of 2.4%, compared to estimates of 2.5% and the March reading of 2.7%. In the same period, the core PPI - which strips off volatile food and energy items - decelerated to 3.1%, as expected, from the prior reading of 4%.

Soft US PPI data paves the way for interest rate cuts by the Federal Reserve (Fed). However, it is expected to be a short-term relief for Fed officials as consumer inflation expectations are elevated in due to the fallout of tariffs by US President Donald Trump.

Meanwhile, a sharp decline in the Oil price has weighed heavily on the Canadian Dollar (CAD). The currency weakens amid growing expectations that the Bank of Canada (BoC) could resume the monetary expansion cycle, which it paused in April amid global economic uncertainty in the wake of tariffs announced by US President Trump. BoC dovish bets have accelerated due to the rising Unemployment Rate.

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