- USD/CAD rises to 1.3820 as mixed Canadian inflation report keeps BoC rate cut hopes firm.
- BoC’s preferred inflation gauge softens to 2.0% on a year-on-year basis.
- The US Dollar hovers near a six-month high as the Fed is expected to delay rate cut plans.
The USD/CAD pair jumps to 1.3820 in Tuesday’s early New York session after Statistics Canada reported a mixed Consumer Price Index (CPI) report for March. The agency showed that monthly headline CPI grew by 0.6%, slower from expectations of 0.7% but higher than the prior reading of 0.3%. However, the annual headline inflation data accelerated to 2.9% from the prior reading of 2.8%.
The monthly Bank of Canada (BoC) CPI core data, which excludes eight volatile items, rose sharply by 0.5% compared to a meagre 0.1% growth in February. However, the annual core CPI slowed to 2% from the prior reading of 2.1%.
The return of the BoC’s most preferred inflation measure to a desired rate of 2% is expected to allow the Bank of Canada (BoC) to start reducing interest rates, which are currently expected from the June policy meeting.
Last week, BoC Governor Tiff Macklem said a rate cut in June is possible if inflation continues to decelerate sustainably after the BoC keeps interest rates unchanged at 5%. The BoC has kept interest rates steady at 5% since July 2023 to maintain downward pressure on consumer price inflation.
Meanwhile, significant demand for safe-haven assets due to worsening geopolitical tensions and faded speculation for Federal Reserve (Fed) rate cuts for the June and July policy meetings have built pressure on the Canadian Dollar.
The US Dollar Index (DXY) falls slightly from a five-month high of 106.44. The near-term demand for the US Dollar remains intact as investors see the Fed keeping interest rates higher for a longer period. Inflation remaining higher than expectations for three months in a row suggests that there should be no urgency for rate cuts.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD retargets the 0.6600 barrier and above
AUD/USD extended its positive streak for the sixth session in a row at the beginning of the week, managing to retest the transitory 100-day SMA near 0.6580 on the back of the solid performance of the commodity complex.
EUR/USD finds support near 1.0720 after slow grind on Monday
EUR/USD jostled on Monday, settling near 1.0720 after churning in a tight but lopsided range as markets settled in for the wait US Fed outing. Investors broadly expect US rates to hold steady this week, but traders will look for an uptick in Fed guidance for when rate cuts could be coming.
Gold advances for a third consecutive day
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Will Bitcoin ignore major macro market developments this week?
Bitcoin price will be an interesting watch this week, with increased volatility expected amid crucial events lined up in the macro market. On Tuesday, Hong Kong will be debuting its BTC and ETH ETFs while the next day will see FOMC minutes make headlines.
Gearing up for a busy week: It typically doesn’t get any bigger than this
Attention this week is fixated on the Federal Reserve's policy announcement scheduled for Wednesday. While the US central bank is widely expected to remain on hold, traders will be eager to discern any signals from the Fed regarding the possibility of future interest-rate cuts.