USD/CAD remains limited below 1.3800, Loonie lacks bullish momentum

• The Canadian Dollar trims some losses but remains within previous ranges.
• Moderate US inflation and higher hopes of Fed cuts are weighing on the US Dollar.
• The extended decline in Crude prices keeps CAD's upside attempts limited.

The Canadian Dollar is drawing some support from the generalised US Dollar weakness, as the moderate US inflation figures seen on Tuesday boosted expectations of Fed monetary easing in September. The pair, however, remains within previous ranges, as the Loonie lacks upside momentum.

US CPI figures revealed that consumer inflation continued to grow at a steady 2.7% year-on-year pace in July, against market expectations of a 2.8% reading. The core CPI accelerated to a five-month high of 3.1% from 2.9% in June, beating expectations of a softer increase to 3.0%.

The data eased concerns about the inflationary impact of tariffs, and futures markets ramped up bets of a quarter-point rate cut after the summer, to 95%, from 85% before the data release. The higher appetite for risk is weighing on US Treasury yields and the US Dollar.

The Canadian Dollar, on the other hand, is lacking bullish momentum to perform a stronger recovery. The decline in Oil prices, which are nearing the $62.00 level after losing nearly $8 so far in August, is weighing heavily on the Canadian Dollar, as Canada's economy is heavily dependent on Crude exports.