USD/CAD picks up bids to pare intraday loss as it bounces off the daily low to 1.3365 heading into Tuesday’s European session. In doing so, the Loonie pair struggles to justify the latest US Dollar weakness amid the sluggish price of Canada’s main export item, WTI crude oil. That said, the quote’s latest inaction could also be linked to the market’s cautious mood ahead of the top-tier data/events, like the US inflation and Federal Reserve (Fed) monetary policy meeting.

US Dollar Index (DXY) prints the first daily loss in three, down 0.20% intraday to near 103.43 by the press time. It’s worth noting that the greenback’s gauge versus six major currencies bears the burden of the downbeat bets on Wednesday’s Federal Open Market Committee (FOMC) monetary policy meeting.

The previously softer US activity and job clues joined unimpressive Fed talks to allow traders to remain dovish on the US central bank. While portraying the same, the CME’s FedWatch Tool suggests more than a 70% chance of the Fed’s inaction on Wednesday while suggesting nearly 80% odds favoring the 0.25% rate increase in July.

On the other hand, WTI crude oil picks up bids to print mild gains around $67.70 as it consolidates the biggest daily slump in two weeks during sluggish markets. fears that China is losing economic momentum also weigh on the WTI price as Beijing is one of the world’s biggest energy consumers. People’s Bank of China (PBoC)  cuts the Repo Rate to 1.9% from 2.0% and confirms the previous fears suggesting slower economic growth in the world’s biggest industrial player. With this in mind, Bloomberg said, “China’s central bank cut a short-term policy interest rate, easing its monetary stance to help aid the economy’s recovery.” Additionally, hopes of the US-Iran deal unveiling more energy output at a time of slower economic recovery contrasts with the hawkish bias of Saudi Arabia and the OPEC to prod the Oil traders.

Amid these plays, the S&P500 Futures print mild gains at the highest level since April 2022, marked the previous day, whereas the US 10-year and two-year Treasury bond yields drop for the second consecutive day to around 3.72% and 4.56% in that order.

Looking ahead, USD/CAD pair traders should keep their eyes on the US Consumer Price Index (CPI) figures for May as the Fed decision looms on Wednesday is bearing expectations of no rate change. It’s worth noting that the market forecasts of witnessing no change in the Core CPI MoM figure of 0.4% is in the spotlight as softer figures could push back the July rate hike concerns and may not allow the Fed to sound hawkish