• USD/CAD trades on a stronger note around 1.3568 on the firmer US Dollar. 
• The January Consumer Price Index (CPI) softened to 3.1% YoY in January from 3.4% in December, better than expected. 
• A tight labor market in Canada might convince the BoC to push back their forecasts on rate cuts until June from April. 

The USD/CAD pair gains traction for the second consecutive day during the early Asian session on Wednesday. The uptick of the pair is bolstered by the US January Consumer Price Index (CPI) inflation data, which lifts the US Dollar (USD) and bond yields higher. USD/CAD currently trades near 1.3568, down 0.01% on the day. 

Data released from the US Bureau of Labor Statistics (BLS) on Tuesday reported that the CPI inflation softened to 3.1% YoY in January from 3.4% in December, beating the market expectation of 2.9%. Meanwhile, the Core CPI, which excludes volatile food and energy prices, climbed 3.9% in the same period, above the market consensus of 3.7%. On a monthly basis, the CPI and the Core CPI rose 0.3% and 0.4%, respectively. 

The Canadian labor market data were unexpectedly strong, with 37,000 jobs increase that more than doubled forecasts. A healthier picture of the labor market might convince the Bank of Canada (BoC) to push back their forecasts on rate cuts until June from April. 

The BoC left the policy interest rate unchanged at 5.0% at its January meeting. Governor Tiff Macklem said that the central bank has shifted from debating whether interest rates are high enough, to how long the central bank needs to keep rates at current levels. Nonetheless, the timeline for interest rate cuts has not yet been indicated. 

Market players will keep an eye on the Canadian Housing Starts and Fed’s Goolsbee and Barr speeches on Wednesday. The Retail Sales and Producer Price Index (PPI) will be due later on Thursday and Friday, respectively. These figures could give a clear direction to the USD/CAD pair.