USD\/CAD traded in a tight range on Friday as the US Dollar stayed firm despite softer US inflation data. The pair was near 1.3625, up modestly and rising for a third straight day.<\/p>\n
US data increased expectations that the Federal Reserve may cut rates later this year. CPI rose 0.2% month-on-month in January, down from 0.3% in December and below the 0.3% forecast.<\/p>\n
Headline CPI slowed to 2.4% year-on-year from 2.7%, missing the 2.5% forecast. Core CPI rose 0.3% month-on-month, matching expectations and up from 0.2%, while core inflation eased to 2.5% year-on-year from 2.6%.<\/p>\n
The Canadian Dollar weakened slightly after reports that President Donald Trump is privately considering withdrawing the US from the USMCA, with no official confirmation. The US Supreme Court has set 20 February as its first opinion day in a case linked to the legality of Trump-era tariffs.<\/p>\n
Lower oil prices also weighed on the Canadian Dollar, as crude often affects Canada\u2019s export income and currency demand. WTI traded around $62.56 after reaching about $65.64 earlier in the week.<\/p>\n
Next week, focus turns to Canada\u2019s CPI for indications on the Bank of Canada\u2019s next policy move. Markets are assessing whether rates could rise later this year or stay on hold.<\/p>\n
As of today, February 13, 2026, we are seeing a different setup than the one we observed this time last year. In early 2025, the market was pricing in Fed rate cuts due to softer inflation, but the Canadian dollar was uniquely weak because of trade risks surrounding the USMCA. This created a tight, uncertain range for USD\/CAD around 1.3625.<\/p>\n
Currently, the narrative has shifted significantly from a year ago. The latest US Consumer Price Index for January 2026 came in hotter than expected at 3.1% year-over-year, forcing the Federal Reserve to hold its policy rate firm at 4.25% and push back against market hopes for a spring rate cut. This contrasts sharply with the 2.4% inflation print we saw in January 2025 which fueled easing expectations.<\/p>\n
Canada is facing a similar, though less severe, inflationary picture, with its own January CPI at 2.9% and the Bank of Canada holding its key rate at 4.00%. This 25-basis-point interest rate differential in favor of the US dollar provides a fundamental tailwind for USD\/CAD that was absent last year. Furthermore, with WTI crude oil now trading robustly near $78 a barrel, the historical headwind of weak oil on the loonie has diminished, making the rate differential the primary driver.<\/p>\n
Given this context, traders should consider positioning for further USD\/CAD strength in the coming weeks. Buying March USD\/CAD call options with a strike price around 1.3700 offers a defined-risk way to profit from a potential move higher, driven by the persistent US-Canada rate gap. This strategy is a direct play on the Fed remaining more hawkish than the Bank of Canada through the first quarter.<\/p>\n
For those anticipating increased volatility around upcoming central bank communications, a long straddle could be an effective strategy. Purchasing both a call and a put option with a March expiry can capitalize on a significant price swing in either direction. This would be particularly useful if next week’s Canadian retail sales data delivers a major surprise that challenges the current market consensus.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CAD edged higher near 1.3625 as softer US inflation, USMCA worries, and weaker oil weighed.<\/p>\n","protected":false},"author":62,"featured_media":16965,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41872","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41872"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41872\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16965"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}