The Canadian dollar is strengthened for the third day as the underlying inflation increases, the American dollar stumbles

• The Canadian dollar extends profits against the US dollar on Wednesday, with the USD/CAD falling below 1,3900.
• The expectations for trimming at Boc’s fad as the underlying inflation remains persistent.
• The US dollar is still under pressure, the DXY falls to a new weekly minimum.

The Canadian dollar (CAD) is further strengthened against the US dollar (USD) on Wednesday, marking a three -day rally, with the USD/Cad sliding below 1,3900 while the markets digest strongest Canadian inflation figures stronger than expected and a widely depressed dollar.

The market reacted to the data published on Tuesday with a renewed uncertainty, since the Canada inflation report showed an unexpected increase in underlying prices despite a strong fall in the general figure. The general consumer price index (CPI) rose to 1.7% year -on -year in April, from 2.9% in March. In monthly terms, the CPI fell 0.1% in April from 0.3% in March, well below market expectations. In contrast, the preferred measure of the Bank of Canada (BOC), the underlying IPC of the BOC, accelerated to 2.5% year -on -year, from 2.2%, and the monthly CPC rose to 0.5% intermensual from 0.1% in March.

The fall in general inflation was partly driven by weaker energy prices, which fell 12.7% year -on -year in April, since the recent elimination of federal carbon tax intensified the impact of the fall in oil prices promoted by the OPEC decision to increase production.

The latest inflation data paint a complex panorama for the BOC before its June rates decision. The BLT maintained its reference interest rate at 2.75% during its April policy meeting. Some economists now lean towards another pause in cuts.

Although the general inflation figure was softened, the increase in underlying measures indicates that the underlying price pressure intensified in April.

“This will make it a much more challenging context for the Canada Bank to continue cutting up rates, at least in the short term,” said Benjamin Reitzes, general director of Canadian rates and macro strategist in BMO Market Capital.

In addition, the impact of US commercial tariffs is adding uncertainty, which could maintain the highest inflation for longer and make it difficult for the Central Bank to advance with its flexibility plans.

Meanwhile, the American dollar index (DXY), which measures the USD in front of a basket of six main currencies, briefly fell below the 100.00 brand to a new weekly minimum, lowering more than 1.2% this week. The dollar remains under pressure in the middle of a broader weakness in the US economy after Moody’s cuts the US sovereign credit rating to AA1 on May 16 and a cautious economic panorama of the Federal Reserve (Fed).

Looking ahead, operators will keep an attentive eye in the US purchase managers index (PMI) that will be published on Thursday and in the next Canada retail sales data on Friday. At the same time, the changes in the US economic policy and the current global commercial developments will continue to play a key role in the USD/CAD torque.