Canadian Dollar Drops Amid Falling Oil Prices; BoC Decision Due

The Canadian dollar drifted lower against its major counterparts in the European session on Wednesday, as oil prices declined on worries over the likelihood of growing U.S. shale oil production, while investors awaited the Bank of Canada's monetary policy decision later in the day.

Crude for February delivery fell $0.74 to $51.74 per barrel.

The U.S. shale output is expected to increase by 41,000 barrels per day to 4.748 million barrels per day in February, the Energy Information Administration said in the Drilling Productivity Report on Tuesday.

The highest rise in shale output is expected in the country's Permian region, where the production is forecast to rise by 53,000 to 2.180 million barrels per day.

The Bank of Canada announces its monetary policy decision at 10:00 am ET, with economists expecting it to retain interest rates at 0.50 percent. The benchmark rate has been kept unchanged since July 2016.

The BoC governor Stephen Poloz and deputy governor Carolyn Wilkins will hold press conference at 11:15 am ET, with investors awaiting cues on future policy.

European markets are trading mixed, as investors digested a slew of company updates and awaited the inauguration of Donald Trump as U.S. President on Friday.

The loonie showed mixed performance in the Asian session. While the currency rose against the euro and the yen, it declined against the greenback. Against the aussie, it held steady.

The loonie fell to 0.9906 against the aussie, its weakest since December 8. On the downside, 1.01 is possibly seen as the next support level for the loonie.

The latest survey from Westpac Bank showed that Australia's consumer confidence inched slightly higher in January, rising 0.1 percent on month to a score of 97.4.

That follows the 3.9 percent contraction in December to a score of 97.3.

Reversing from an early high of 1.3955 versus the euro, the loonie dropped to a 5-day low of 1.4006. Continuation of the loonie's downtrend may see it challenging support around the 1.43 mark.

Final data from Eurostat showed Eurozone inflation climbed as initially estimated in December.

Inflation rose to 1.1 percent in December from 0.6 percent in November.

The loonie pared gains to 86.46 against the Japanese yen, from a high of 86.77 hit at 3:45 am ET. The loonie is seen finding support around the 85.00 region.

The loonie reached as low as 1.3112 against the greenback, down from a high of 1.3038 hit 5:00 pm ET. Further downtrend may take the loonie to a support around the 1.34 region.

Looking ahead, U.S. NAHB house price index for January, U.S. CPI for December and industrial production for December are slated for release in the New York session.

At 9:00 am ET, Federal Reserve Bank of Dallas President Robert Kaplan will participate in a panel before the University of Texas at Austin 2017 Business Forecast, in Dallas.

At 11:00 am ET, Federal Reserve Bank of Minneapolis President Neel Kashkari is expected to speak about the economy at the Minneapolis Urban League, in Minneapolis.

At 2:00 pm ET, Federal Reserve's Beige book report is set to be published.

At 3:00 pm ET, Federal Reserve Chair Janet Yellen will deliver a speech titled "The Goals of Monetary Policy and How We Pursue Them" at the Commonwealth Club, in San Francisco.