USD/CAD advances to daily highs above 1.2500 after US inflation report

• USD/CAD is rising sharply in early American session.
• Annual CPI inflation in US rose to 5.4% in June.
• US Dollar Index advances above 92.50 after CPI data.

The USD/CAD pair gained traction in the early American session and reached a daily high of 1.2522. As of writing, the pair was up 0.5% on the day at 1.2513.

DXY shoots higher on stronger-than-expected CPI

The renewed USD strength seems to be fueling USD/CAD's upside on Tuesday. The monthly data published by the US Bureau of Labor Statistics revealed that inflation in the US, as measured by the Consumer Price Index (CPI), jumped to 5.4% in June. This reading surpassed the market expectation of 4.9% by a wide margin and provided a boost to the greenback. Additionally, the Core CPI, which strips volatile energy and food prices, increased to 4.5%, compared to analysts' estimate of 4%.

Reflecting the positive impact of these figures on the USD, the US Dollar Index (DXY) spiked to a daily high of 92.63 before retreating modestly. At the moment, the DXY is up 0.3% on a daily basis at 92.52.

In the meantime, US stocks futures turned negative on the day after the CPI report, suggesting that risk-off flows could allow the USD to continue to outperform its rivals after the opening bell.

Technical levels to watch for