USD/CAD gains ground above 1.3750 as traders pare back Fed rate cut expectation

The USD/CAD pair trades in the positive territory around 1.3765 amid the renewed US Dollar (USD) demand on Tuesday during the early Asian trading hours. Meanwhile, the decline in crude oil prices undermines the commodity-linked Loonie and creates a tailwind for USD/CAD. 

The robust US employment data for May pared back rate cut expectations from the Federal Open Market Commit (FOMC). Traders are now pricing in nearly 47% chances of a rate cut for the September meeting, down from 68% before the NFP data, according to the CME FedWatch tool. At the June monetary meeting on Wednesday, the US Federal Reserve (Fed) is expected to maintain interest rates steady in the range of 5.25%-5.50 to curb inflation towards the Fed’s 2% target. 

The US Consumer Price Index (CPI) inflation data on Wednesday might offer some hints about the inflation trajectory and future monetary policy outlook. The US headline and CPI figure are estimated to show an increase of 3.4% YoY abd e 3.5% YoY in May. 

Meanwhile,  Crude Oil prices edge lower as OPEC ministers said that they would not increase supply if prices remained weak. It's worth noting that  Canada is the dominant source of crude oil imports for the United. States and higher oil prices generally underpin the Canadian Dollar (CAD).