- USD/CAD falls sharply as the Canadian Dollar appreciates after the stubbornly higher Canadian inflation report for May.
- The hotter-than-expected Canada's inflation report has trimmed expectations for the BoC’s subsequent rate cuts.
- Fed Bowman sees interest rates remaining at their current levels for the entire year.
The USD/CAD pair witnesses a sharp sell-off in Tuesday’s New York session. The Loonie asset comes under pressure as May Consumer Price Index (CPI) report from Statistics Canada showed that price pressure surprisingly rose higher than April’s reading. This has dented expectations of subsequent rate cuts by the Bank of Canada (BoC). The BoC commenced its policy-easing campaign at its policy meeting in early June.
The CPI report showed that annual headline inflation unexpectedly grew by 2.9%. Investors expected price pressures to have declined to 2.6% from the prior release of 2.7%. On month, headline CPI grew strongly by 0.6% than the former release of 0.5%. The BoC core CPI, which excludes eight volatile items, grew at a faster pace of 0.6% than expectations and the prior reading of 0.2% on month-on-month. Annually, the underlying inflation data accelerated to 1.8% from 1.6% in April.
Meanwhile, the US Dollar Index (DXY) bounces back after correcting to near 105.40. The USD Index rebounded after Federal Reserve (Fed) Governor Michelle Bowman delivered hawkish guidance on interest rates. Fed Bowman said we are not at a point where rate cuts become appropriate. Bowman pushed back expectations of rate cuts to 2025 and warned of more hikes if disinflation appears to stall or reverse.
This week, the major trigger for the US Dollar will be the United States (US) core Personal Consumption Expenditure Price Index (PCE) for May, which will be published on Friday. The core PCE price index data is the Fed’s preferred inflation measure, which will provide fresh cues on when and how much the central bank will reduce interest rates this year.
(The article was corrected on June 25 at 13:30 GMT to say that "The hotter-than-expected Canada's inflation report has trimmed expectations for the BoC’s subsequent rate cuts instead of US Inflation report)
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
EUR/USD retreats from multi-month tops, back near 1.1050
Following a move to six-month highs in the 1.1140-1.1150 band, EUR/USD now gives away part of those gains on the back of a mild attempt of recovery in the US Dollar as investors continue to assess President Trump's recent annoucements.
GBP/USD off highs, remains well bid near 1.3100
GBP/USD now partially sets aside its earlier advance in favour of fresh peaks just north of the 1.3200 mark, challenging the 1.3100 neighborhood on the back of a tepid bounce from recent multi-month lows in the Greenback.
Gold looks offered near $3,100
Prices of Gold remain on the defensive on Thursday, hovering around the $3,100 region per troy ounce and retreating from earlier all-time peaks near the $3,170 level, all against the backdrop of investors' assessment of "Liberation Day".
SOL is the winner as Solana chain turns into battleground for meme coin launchpad and DEX
Solana (SOL) gains nearly 2% in the last 24 hours and trades at 118.28 at the time of writing on Thursday. A Decentralized Exchange (DEX) and a meme coin launchpad built on the Solana blockchain have waged a war for users and compete for the trade volume on the chain.
Trump’s “Liberation Day” tariffs on the way
United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.