- The prevailing mixed market climate weakens the US dollar.
- Rising Canadian inflationary pressures weigh on USD / CAD.
- The BoC’s stance on inflation is the same as the Fed’s “transitory.”
The USD / CAD it fell during the American session, trading at 1.2646, down 0.36% at the time of writing. Before the opening of the US stock market, the pair is trading around 1.2690, but Canadian economic data strengthened the loonie, thus resuming the downward trend.
Market sentiment is mixed. In the US, the major stock indices are mixed with the Dow Jones and the S & P500, recovering some of yesterday’s losses, rising 0.04% and 0.15% respectively, while the Nasdaq for heavy technology is down 0.17. %. Commodity currencies such as the CAD, AUD and NZD rose on the back of the general weakness of the US dollar.
Canadian inflation rises above 4%, boosts Canadian dollar
Earlier in the session, Statistics Canada released inflation figures. The consumer price index rose to 4.1% in August from 3.7% in July. The market expected it at 3.9%. Additionally, the Bank of Canada’s core CPI, which excludes food and energy prices, rose to 3.5% from 3.3% annually, still lower than the 3.7% estimate.
The market reaction to the readings was bearish for the pair, with USD / CAD falling to 1.2640 due to a higher than expected reading. However, the Bank of Canada’s position is that mounting inflationary pressures will be temporary.
According to TD analysts: “The BoC will maintain its view that this increase is largely transitory. However, the continued strength of the IPC will give the BoC more reason to keep its forward orientation unchanged in light of recent poor growth figures. “
On the US economic agenda, Industrial Production for August slowed to 0.4% from 0.8% in July. The forecast was 0.5%. The slowdown is attributed to Hurricane Ida-related shutdowns at the end of the month in the petrochemical sector.
On Thursday, Canada will launch Housing Starts, forecast at 242,200. On the US front, the Retail Sales figure, expected at -0.8%, and Initial Unemployment Claims, forecast at 339,500, will be released at 12.30 GMT.