Canadian Dollar weakens as US CPI puts October Fed hike in play
- USD/CAD rises 0.50% as the US Dollar climbs following hotter-than-expected US inflation data.
- Rising US Treasury yields and Fed interest rate-hike expectations support the Greenback.
- Diverging Fed-BoC policy outlooks remain a key headwind for the Loonie.
USD/CAD climbs on Wednesday, reversing all of the previous day’s losses as the US Dollar (USD) rallies to a fresh year-to-date high following stronger-than-expected US inflation data. At the time of writing, USD/CAD trades around 1.4287, up 0.50% on the day near 18-month highs.
The September Consumer Price Index (CPI) rises 0.6% monthly, matching expectations and picking up from August’s 0.4% increase. Annual headline inflation climbs to 3.7% from 3.4%, exceeding the 3.6% forecast.
Core CPI, which excludes food and energy, increases 0.3% monthly, above the 0.2% expected and unchanged from August. The annual core rate rises to 2.6% from 2.4%, also beating the 2.5% forecast.
The report gives the Federal Reserve (Fed) less reassurance that inflation is moving toward its 2% target, particularly as elevated Oil prices linked to Middle East tensions keep inflation risks tilted to the upside.
Traders now assign around a 50% chance of a rate hike at the Fed’s October 27-28 meeting, up from 22% before the release, while the probability of a December increase rises to 95%, according to the CME FedWatch Tool. Traders next look to US Producer Price Index (PPI) and retail sales figures due on Thursday.
Expectations of further Fed tightening after September’s 25-basis-point rate hike underpin broad demand for the US Dollar and keep US Treasury yields near multi-year highs. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, climbs toward 102.80, its strongest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield rises toward 5.30%, after falling below 5.20% earlier this week.
Recent Fed comments show policymakers remain concerned about inflation. Boston Fed President Susan Collins said on Tuesday she expects “inflation to stay above 2% due to high energy prices.” Collins added that the “future path of monetary policy in new year will depend on data.”
Fed rate-hike expectations remain a key headwind for the Canadian Dollar. The Bank of Canada (BoC) has kept interest rates unchanged at 2.25% so far this year, leaving US rates 150-175 basis points (bps) above the Canadian policy rate. Further Fed tightening could widen that gap, while underlying inflation is near its 2% target and a weakening labour market gives the BoC little reason to raise rates soon.
Canadian Dollar Price Last 30 days
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies last 30 days. Canadian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 4.25% | 2.66% | 3.41% | 3.01% | 2.86% | 4.30% | 2.70% | |
| EUR | -4.25% | -1.56% | -0.83% | -1.20% | -1.34% | 0.04% | -1.50% | |
| GBP | -2.66% | 1.56% | 0.75% | 0.37% | 0.22% | 1.65% | 0.03% | |
| JPY | -3.41% | 0.83% | -0.75% | -0.40% | -0.59% | 0.79% | -0.73% | |
| CAD | -3.01% | 1.20% | -0.37% | 0.40% | -0.12% | 1.25% | -0.34% | |
| AUD | -2.86% | 1.34% | -0.22% | 0.59% | 0.12% | 1.40% | -0.18% | |
| NZD | -4.30% | -0.04% | -1.65% | -0.79% | -1.25% | -1.40% | -1.57% | |
| CHF | -2.70% | 1.50% | -0.03% | 0.73% | 0.34% | 0.18% | 1.57% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Author
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
