USD/CAD pulls back amid US Dollar correction, lower crude Oil prices

• USD/CAD retreats from a five-month high of 1.3846 reached on Tuesday.
• The decline in crude Oil prices might have contributed to undermining the Canadian Dollar.
• Fed Chair Powell highlighted that recent data indicates the timeframe for achieving the 2% inflation target will be longer than initially anticipated.

USD/CAD snaps its five-day winning streak, trading around 1.3820 during the Asian session on Wednesday. The mild correction in the US Dollar (USD) contributes to downward pressure on the USD/CAD pair. However, the weaker crude Oil prices could put pressure on the Canadian Dollar (CAD), consequently, limiting the losses of the pair.

The latest Canadian inflation figures provided support for the Bank of Canada (BoC) to consider easing borrowing conditions in its June meeting, as the closely monitored core inflation showed signs of sustained easing.

Consumer Price Index (CPI) increased by 0.6% month-over-month, slightly below the expected 0.7% in March but higher than the previous increase of 0.3%. CPI (YoY) rose by 2.9% against 2.8% prior. Meanwhile, Core CPI (YoY) rose by 2.0% at a slower pace compared to the previous 2.1% rise. The monthly Core index showed an increase of 0.5%, higher than the previous 0.1%.

On the other side, hawkish remarks from Federal Reserve (Fed) officials and the influx of safe-haven flows could bolster the US Dollar (USD) and potentially limit the downside of the USD/CAD pair. The US Dollar Index (DXY) pulls back from a five-month high of 106.51 reached on Tuesday. This decline could be attributed to a slight decline in US Treasury yields.

Federal Reserve (Fed) Chairman Jerome Powell remarked on Tuesday that the US economy has exhibited notable strength. However, Powell also noted that recent data suggests insufficient progress on inflation this year, and achieving the confidence that inflation will reach the 2% target will take "longer than expected." This hawkish stance by Powell might have lent some support to the US Dollar.