USD/CAD hovers below 1.3800 amid improved Oil prices ahead of US inflation data

• USD/CAD may struggle as the commodity-linked CAD receives support from improved Oil prices.
• Oil prices rose on improved market sentiment after the Trump administration postponed implementing tariffs on China.
• The CAD may come under pressure as odds of a BoC rate cut strengthen, following Canada's recent disappointing jobs data.

USD/CAD stays silent after registering gains in the previous three consecutive days, trading around 1.3780 during the Asian hours on Tuesday. The pair may face challenges as the commodity-linked Canadian Dollar (CAD) receives support from improved crude Oil prices. It is important to note that Canada is the largest Oil exporter to the United States (US).

West Texas Intermediate (WTI) Oil price extends its gains for the second successive session, trading around $63.50 per barrel at the time of writing. Crude Oil prices appreciate on improved market sentiment after US President Donald Trump announced late Monday to postpone the implementation of sweeping tariffs on China for an additional 90 days. The decision came just hours before the previous agreement between the world's two largest economies was set to expire. In response, China's Commerce Ministry announced it would suspend additional tariffs on US goods for the same period, following Trump's executive order extending the tariff truce.

However, the Canadian Dollar (CAD) may struggle amid reinforcing odds of the Bank of Canada (BoC) interest rate cuts, driven by the recent disappointing Canadian job data. Additionally, US President Donald Trump's decision to impose a 35% tariff on Canadian aluminum, along with looming auto-parts duties that threaten Canada's key manufacturing exports, is adding fresh pressure to the trade-exposed economy.

The USD/CAD pair moves little as traders adopt caution ahead of the US consumer inflation data, due later in the North American session. The July Consumer Price Index (CPI) is forecast to rise 0.2%, slightly below June's 0.3%, while the annual rate is projected to accelerate for the third consecutive month to 2.8%. Core CPI is also anticipated to pick up to 0.3%.

Traders raise their bets on two interest rate cuts by the US Federal Reserve (Fed) after weaker data on US jobs and PMI. Markets are now pricing in approximately 84% odds of a Fed rate cut at the September meeting, down from 90% a week ago, according to the CME FedWatch tool.