Canadian dollar falls after inflation data shows further slowdown in June

• The Canadian dollar fell after the publication of lower-than-expected inflation in June.
• The data indicate a higher probability that the Bank of Canada will lower interest rates again in July.
• Meanwhile, the US Dollar strengthens following US retail sales data, pushing USD/CAD higher within its range.

The USD/CAD is trading higher and has breached the 1.3700 mark, following the release of Canada’s Consumer Price Index (CPI) data for June, which showed an easing of inflationary conditions in Canada. The data further raises the prospect that the Bank of Canada (BoC) will cut its key interest rate again at its July 24 monetary policy meeting, after having already cut its policy rate by 0.25% to 4.75% in June.

Lower interest rates generally depreciate a currency as they reduce foreign capital inflows. The Canadian Dollar (CAD) is weakening against the US Dollar (USD) following the release, as the USD itself is boosted higher in most pairs following the release of US Retail Sales data at the same time as the Canadian CPI was released.

Canadian Dollar Falls After Canadian Inflation Cools in June

The Canadian dollar is weakening after Canada’s Consumer Price Index (CPI) in June showed a 0.1% month-on-month decline compared to the previous month’s 0.6% increase and missed expectations of 0.1%, according to data from Statistics Canada on Tuesday.

On an annual basis, the CPI rose by 2.7% in June compared to 2.9% previously.

Core CPI rose 0.1% compared with 0.3% previously.

The Bank of Canada’s core CPI rose 1.9% year-on-year in June from 1.8% previously, and on a monthly basis fell 0.1% month-on-month compared with a 0.6% increase in May.

USD strengthens after US retail sales release

The US Dollar strengthened against the Canadian Dollar on Tuesday after June retail sales data was released either in line with or above economists’ expectations. The data suggests that the US economy remains resilient, which in turn supports the Dollar.

U.S. retail sales rose 0.0% in June, as expected, and below the upwardly revised 0.3% in May, according to the data. data from the U.S. Census Bureau on Tuesday.

Retail sales excluding autos rose 0.4% in June compared with an estimated 0.1% increase from an upwardly revised 0.1% previously.

Retail sales in the Control Group showed an increase of 0.9% from 0.4% in May. The Control Group is adjusted for seasonal variations and differences in trading days and is considered a more accurate measure of sales.