USD/CAD wobbles below 1.3700 as US inflation takes centre stage

• USD/CAD trades sideways below 1.3700 ahead of the US inflation data for May.
• The US CPI data will influence market expectations for the Fed's monetary policy outlook.
• Lower Oil price weigh on the Canadian Dollar.

The USD/CAD trades in a tight range below 1.3700 during European trading hours on Wednesday. The Loonie pair consolidates as investors await the United States (US) Consumer Price Index (CPI) data for May, which will be published at 12:30 GMT.

Economists expect the US headline inflation to have accelerated to 2.5% from 2.3% in April. The core CPI - which excludes volatile foods and energy prices - is expected to have grown at a faster pace of 2.9%, compared to the prior reading of 2.8%.

CPI expectations indicate that the tariff policy imposed by US President Donald Trump has started feeding into the economy. The scenario of accelerating inflationary pressures will encourage Federal Reserve (Fed) officials to commit to holding onto their stance that monetary policy adjustments are not appropriate unless they scrutinize the likely consequences of new economic policies imposed by Trump.

Ahead of the US inflation data, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades flat around 99.00.

Meanwhile, the Canadian Dollar (CAD) ticks down as market experts see the Oil price falling amid demand concerns. The US Energy Information Administration (EIA) anticipated a decline in international benchmark Brent crude to $61/bbl by end-2025, citing demand concerns and rising output.

Given that Canada is the leading exporter of Oil to the US, lower energy prices weigh on the Loonie.