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Canadian dollar rises to four-week high versus dollar after US CPI

USD/CAD fell to about 1.4055, while the odds of a July Fed hike dropped to 12% after US CPI cooled more than expected.

Reported · Written up by our desk · Major Pairs

The Canadian dollar strengthened sharply against the US dollar, with USD/CAD trading around 1.4055, its lowest level since June 17, after US inflation data came in cooler than expected, FXStreet said. The move reflected broad US dollar selling following the latest Consumer Price Index release.

According to FXStreet, US CPI fell 0.4% month over month in June after a 0.5% rise in May, compared with expectations for only a 0.1% decline. Annual inflation slowed to 3.5% from 4.2%, and core CPI was flat month over month, while annual core inflation eased to 2.6% from 2.9%, below forecasts.

The report also pointed to shifting rate expectations, with traders quickly scaling back the probability of an imminent Federal Reserve rate hike. FXStreet cited CME FedWatch Tool data showing the chance of a July hike falling to 12% from 40% before the CPI release, and the odds of a September increase easing to 59% from 74%.

FXStreet linked additional support for the Canadian dollar to higher oil prices amid escalating tensions in the Middle East. It said WTI traded around $78.00, up about 9% for the week, and noted Canada is a major crude oil exporter, while attention turns next to the Bank of Canada policy decision on Wednesday, widely expected to keep its rate unchanged at 2.25%.

Latest closeWTI crude $78.04 ▲9.3%

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