The Canadian dollar experienced a slight decline on Monday, pulling back from a five-month high against its U.S. counterpart. This shift comes as oil prices dip and traders brace for the upcoming Bank of Canada (BoC) interest rate decision.

The loonie fell by 0.1 percent to 1.3875 per U.S. dollar, equivalent to 72.07 U.S. cents, after reaching its highest level since November 6 at 1.3829.

Rahim Madhavji, president of KnightsbridgeFX.com, noted, "It had a good run recently, but it seems the rally has lost momentum. Everyone is now looking forward to the inflation report due Tuesday and the crucial monetary policy decision on Wednesday."

All eyes are on Canada’s consumer price report for March, expected to stabilize at an annual inflation rate of 2.6 percent—matching February's figures. However, growing concerns over recession risks stemming from the U.S.-led trade war have some predicting that the BoC may resort to at least two interest rate cuts this year.

Despite these challenges, a recent Reuters poll indicates that the majority of economists expect the benchmark rate to remain unchanged at 2.75 percent during Wednesday's announcement. Interestingly, market data reflects a 55 percent probability of a pause in any immediate rate cuts.

Adding to the complexities, oil prices—key to the Canadian economy—dropped by 0.6 percent to $61.15 per barrel. Traders worry that ongoing trade tensions could dampen global growth, despite some electronic goods receiving exemptions from U.S. tariffs.

On a brighter note, speculative positions against the Canadian dollar have decreased significantly, reaching their lowest level since October, according to data from the U.S. Commodity Futures Trading Commission. As of April 8, net short positions fell to 119,241 contracts from 130,016 the previous week.

In the bond market, Canadian yields mirrored the downward trend seen in U.S. Treasury yields, which pulled back after a dramatic rise last week. The 10-year yield saw a notable drop of 13.6 basis points, settling at 3.131 percent.