Key points:
- The USDCAD currency pair kept rising despite upbeat Canadian CPI data.
- The Canadian dollar remained weaker than the US dollar due to other factors.
- The loonie’s weakness is expected to continue in the future.
The USDCAD currency pair was trading up for the day despite the Canadian dollar’s spirited attempt to rally against its US peer following the release of upbeat CPI data from Canada, which boosted the loonie.
However, the loonie did not have the much-needed momentum to turn the table on the greenback, which held on to its gains; hence, the USDCAD currency pair was rising at the time of publishing.
Also read: The Best Currency Pairs To Trade In The Forex Market.
The Canadian CPI data released by Statistics Canada showed that the country’s annualised inflation print fell to 6.0% in September, while the final August inflation print was adjusted to 6.0% from 7.0%. However, the core CPI print,w which excludes food and energy prices, surprised analysts and investors, by rising to 6.0% y/y from last month’s 5.8%.
Still, the USDCAD currency pair kept rising as the upbeat inflation data proved insufficient to stop the US dollar’s rise. The loonie’s weakness was also attributed to the falling crude oil prices, given that Canada is a net oil exporter, and higher oil prices tend to lift the loonie.
Moreover, the Canadian dollar’s overall weakness could also be due to the policy differences between the Bank of Canada and the US Federal Reserve. Inflation in Canada has been falling, and the BoC is expected to take a more dovish stance at its next monetary policy meeting. The opposite is true of the United States, where the inflation rate remains high, and the job market still shows strength.
Canada’s job market has been softening recently, which puts the Bank of Canada in a challenging position. Any further rate hikes could lead to job losses as struggling companies close their businesses. The BoC may even adopt quantitative easing measures to boost the economy, especially the weak labour market.
Meanwhile, the USDCAD had recouped all its losses and was trading up 60.9pips (0.44%) by the time I was done with the article and ready to publish.
*This is not investment advice.
USDCAD Daily Price Chart.
The USDCAD price was trading up 13.4 pips (0.10%) as the Canadian dollar struggled to claw back some of its earlier losses.