The Canadian dollar strengthened beyond 1.4 per USD, rebounding from the May 2020 low of 1.41 recorded on November 15th, as higher-than-expected inflation reduced the likelihood of significant rate cuts by the Bank of Canada (BoC).
The BoC’s trimmed-mean core inflation rate, its key indicator for measuring underlying price pressures, climbed to 2.6% in October, up from a three-year low of 2.4% in September and exceeding market expectations.
This increase was supported by robust economic data, including lower-than-anticipated unemployment figures and strong PMI readings, which further lowered expectations for substantial monetary easing.
Despite these gains, the Canadian dollar’s advance was limited by a strong U.S. dollar, bolstered by expectations of a less accommodative Federal Reserve, concerns over U.S. import restrictions impacting Canadian exports, and safe-haven demand amid intensifying conflict in Ukraine.
