• USD/CAD remains on the defensive near the 1.3180 mark after the softer US inflation data. 
• The Bank of Canada (BoC) raised the rate by 25 basis points (bps) to 5.0%, as expected.
• The US inflation data supported the view about the last Fed hike at the July policy meeting.

The USD/CAD pair extended the downside after the US Consumer Price Index (CPI) data and the Bank of Canada (BoC) policy decision on Wednesday. The pair remains under pressure and currently trades near 1.3180 in the early Asian session. 

Following the July policy meeting on Wednesday, the Bank of Canada (BoC) raised the benchmark interest rate by 25 basis points (bps) to 5%, as the market expected. BoC Governor Tiff Macklem commented on the policy outlook that higher interest rates are necessary in order to slow demand growth in the economy and alleviate price pressures. He added that the BoC is likely to hike additional rates. 

The BoC's decision to raise rates comes after the release of US inflation data for June. The US Bureau of Labor Statistics publication showed that CPI declined to 3% YoY from the 3.1% prior. Meanwhile, the core CPI fell to 4.8% YoY from 5.3% versus the market consensus of 5%. The US Dollar faced some follow-through selling after the data and sharply declined to near 101.50, the lowest since April 2022. The inflation data reinforced expectations that the Federal Reserve will hold interest rates following an additional 25 bps raise at the July 25-26 policy meeting.

Moving on, market participants will focus on the release of the US Producer Price Index (PPI) for June and Unemployment Claims due later during the early North American session this Thursday. Investors will look for a fresh impetus and find trading opportunities around the USD/CAD pair