• USD/CAD loses ground due to improved risk-on sentiment.
• The US Dollar steadies from the reduced bets for a 50 basis point rate cut by the Fed in September.
• The upside of the commodity-linked CAD could be limited due to lower WTI Oil prices.

USD/CAD edges lower to near 1.3740 during the early European session on Tuesday. However, the US Dollar (USD) holds ground due to decreased expectations for a 50 basis point interest rate cut by the US Federal Reserve (Fed) in September.

According to CME’s FedWatch Tool, the probability of 50 basis points (bps) cut in September has dropped to 50%, down from 85% last week. However, the rate markets continue to price in a 100% chance of at least a 25 bps cut at the upcoming meeting.

Investors will likely focus on the US Producer Price Index (PPI) data set to be released on Tuesday and Consumer Price Index (CPI) figures on Wednesday. Traders are looking for confirmation that price growth remains stable in the United States.