The Canadian Dollar (CAD) has gained momentum against the US Dollar (USD), with the USD/CAD exchange rate extending its losses for the second consecutive day and falling to its lowest level since September 1. As of the latest updates, the pair is trading around 1.3744, showing a decline of nearly 0.25% on the day.
This movement comes in the wake of Canada’s Consumer Price Index (CPI) report for August, which revealed a nuanced picture of inflation dynamics in the economy. The headline CPI rose 1.9% year-over-year, slightly below the anticipated 2.0% but showing an increase from July’s 1.7%. However, on a monthly basis, CPI saw an unexpected decline of 0.1%, defying forecasts for a flat reading and representing a notable drop from July’s 0.3% rise.
In contrast, the broader Core CPI, which excludes volatile items, recorded a modest 0.2% increase compared to the prior month’s 0.1% gain. Despite these mixed signals, the Bank of Canada (BoC) continues to be under scrutiny as markets are fully pricing in a 25-basis-point rate cut at its upcoming monetary policy meeting on Wednesday, which would reduce the overnight rate to 2.50%. Investors are eagerly awaiting the accompanying statement and press conference for indications on future monetary policies.
Meanwhile, the US Dollar remains under increasing pressure, evidenced by the US Dollar Index (DXY) slipping below the 96.00 mark, reaching its lowest point since July 7. The recent positive economic data from the US, including stronger-than-expected figures for Retail Sales and Industrial Production for August, did little to rescue the Greenback. This suggests that market sentiment is leaning more towards the dovish stance of the Federal Reserve, which is expected to announce a similar 25-basis-point rate cut on Wednesday. Attention is also likely to be focused on the updated dot plot and remarks from Chair Powell regarding the potential duration of the easing cycle.
The performance of the US Dollar against other major currencies shows varied results. It has weakened against the Euro, British Pound, and Japanese Yen, while holding steady against the Canadian Dollar. In terms of percentage changes, the USD was down 0.55% against the Euro and 0.41% against the Pound, with fluctuations similar across other currencies listed in the recent analysis.
As traders prepare for crucial central bank meetings, the outlook for both the CAD and USD appears heavily influenced by upcoming monetary policy decisions and ongoing economic data releases.
