The Canadian dollar strengthened against its major counterparts in the European session on Wednesday, a data showing a decline in U.S. crude inventories buoyed oil prices.

Crude for April delivery rose $0.73 to $56.25 per barrel.

Data from the American Petroleum Institute showed that U.S. crude oil inventories fell by 4.2 million barrels to 444.3 million barrels in the week to February 22.

The U.S. Energy Information Administration will release its crude inventory data later in the day.

Oil prices received further support from OPEC's plan to continue its supply cuts despite heightened political pressure from U.S. President Trump to loosen its supply cuts.

Meanwhile, European stocks retreated after Fed Chair Jerome Powell warned of potential slower growth and mounting U.S. debt.

Rising geopolitical tensions between India and Pakistan as well as caution ahead of a crucial meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un in the Vietnamese capital also kept investors nervous.

The loonie traded mixed against its major counterparts in the Asian session. While it held steady against the aussie and the greenback, it rose against the euro. Against the yen, it dropped.

The loonie bounced off to 84.03 against the yen, from a low of 83.76 hit at 2:15 am ET. The loonie is likely to challenge resistance around the 86.00 level.

The loonie rose to a 2-day high of 1.3144 against the greenback from yesterday's closing value of 1.3168. Next key resistance for the loonie is seen around the 1.30 mark.

The loonie rose back to 1.4974 against the euro from an early low of 1.5008. The loonie is poised to challenge resistance around the 1.48 level.

Survey results from the European Commission showed that Eurozone economic sentiment deteriorated for a sixth consecutive month and at a faster than expected pace in February.

The economic sentiment indicator fell to 105.3 from 106.2 in January. Economists had expected a reading of 106.

The loonie advanced to a 2-day high of 0.9417 against the aussie, off an early 6-day low of 0.9476. The loonie is seen finding resistance around the 0.93 level.

Looking ahead, Canada consumer price index for January, U.S. pending home sales for the same month, wholesale inventories, advance goods trade data and factory orders, all for December, are scheduled for release in the New York session.

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