USD/CAD remains capped below the 1.3400 mark, BoC Business Outlook Survey eyed

• USD/CAD trades on a softer note near 1.3391 on the softer USD.
• The swaps market anticipates nearly 175 basis points (bps) of Federal Reserve (Fed) easing this year.
• The Bank of Canada (BoC) is widely expected to start cutting interest rates this year after a series of rate hikes.
• The Canadian Consumer Price Index (CPI), and US Retail Sales for December will be in the spotlight this week.

The USD/CAD pair remains capped under the 1.3400 mark during the early European trading hours on Monday. The downtick of the pair is backed by the decline of the US Dollar (USD) and the weaker US Producer Price Index (PPI) report. The pair currently trades around 1.3391, gaining 0.19% on the day.

The Federal Reserve’s (Fed) easing expectations remain elevated. According to the WIRP, the markets have priced in nearly 85% odds of a rate cut at their March meeting versus 75% at the start of last week. Additionally, the swaps market anticipates nearly 175 basis points (bps) of Fed easing this year, compared to less than 150 bps at the start of last week. The US December Retail Sales data Wednesday will be in the spotlight. The headline figure is estimated to show an increase of 0.4% MoM from 0.3% in November.

On the Loonie front, the Bank of Canada (BoC) is widely expected to start cutting interest rates this year after a series of rate hikes. The first rate cuts might take place as early as this spring. WIRP suggests a rate cut is fully priced at its April meeting, with nearly 150 bps of total rate cut priced in for this year. Meanwhile, the Canadian Consumer Price Index (CPI) for December on Tuesday could offer some hints about further monetary policy by BoC. The headline inflation is expected at 3.3% YoY from 3.1% in November.

Later on Monday, the Canadian Wholesale Sales, Manufacturing Sales, and Bank of Canada Business Outlook Survey will be released. On Tuesday, market players will keep an eye on the December Canadian Consumer Price Index (CPI). The attention will shift to the December US Retail Sales on Wednesday. Traders will take cues from these figures and find trading opportunities around the USD/CAD pair.