CANADA FX DEBT-Canadian dollar gains as CPI data fails to boost rate cut bets

By Fergal Smith

TORONTO, June 24 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday, as domestic data showed underlying inflation easing in May but not by enough to bolster expectations for additional interest rate cuts from the Bank of Canada.

The loonie CAD= was trading 0.3% higher at 1.3690 per U.S. dollar, or 73.05 U.S. cents, after trading in a range of 1.3679 to 1.3738.

Canada's annual inflation rate in May was unchanged from the previous month at 1.7%, while CPI-trim and CPI-median - two core measures of inflation closely tracked by the BoC - both eased to 3%, which is the upper-end of the central bank's target range.

"I still think it's too warm to be contemplating rate cuts as soon as the July meeting but we'll get another report (before then) and so there's still some residual uncertainty," said Derek Holt, vice president of capital markets economics at Scotiabank.

Investors see a 34% chance the BoC resumes its easing campaign at the next policy announcement on July 30, down from 38% before the data. Inflation data for June is set for release on July 15.

The safe-haven U.S. dollar .DXY fell against a basket of major currencies after President Donald Trump announced a ceasefire between Israel and Iran. Data that showed U.S. consumer confidence declining in June added to pressure on the greenback even as U.S. Federal Reserve Chair Jerome Powell said the central bank needs more time to see if rising tariffs drive inflation higher before considering interest rate cuts.

The price of oil CLc1, one of Canada's major exports, was trading 5.1% lower at $65.04 a barrel on what the market viewed as lower risk of supply disruptions in the Middle East.

Canadian government bond yields edged lower across the curve, tracking moves in U.S. Treasuries. The 10-year CA10YT=RR was down 1.3 basis points at 3.266%.