USD/CAD rises as loonie weakens before Canadian inflation data

USD/CAD has advanced as the Canadian dollar weakens ahead of crucial inflation figures scheduled for release. The loonie's deterioration reflects market positioning for potentially softer CPI data that could influence the Bank of Canada's monetary policy trajectory. Recent Canadian economic indicators have shown mixed signals, with the labor market remaining resilient while consumer spending shows signs of cooling. Traders are particularly focused on core inflation measures, which the BoC closely monitors for rate decision guidance. A weaker-than-expected inflation print could reinforce expectations for a more dovish BoC stance, potentially widening the policy divergence with the Federal Reserve. Technical analysis shows USD/CAD testing resistance levels, with momentum indicators favoring further upside if Canadian inflation disappoints. The pair's immediate direction will largely depend on whether the inflation data supports or challenges current market pricing for BoC rate cuts in the coming quarters.