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Canadian dollar holds firm near 6-week high amid cooling inflation

Posted on August 26, 2024 |

The Canadian dollar leveled off against the U.S. dollar after earlier gains, trading nearly unchanged at 1.3630 per U.S. dollar (73.37 U.S. cents), following its strongest intraday level since July 11 at 1.3606.

Canada's annual inflation rate dropped to a 40-month low of 2.5% in July, matching expectations, with core inflation also easing.

The Bank of Canada has lowered its policy interest rate twice since June, each time by 25 basis points, bringing it to 4.50%.

Markets are fully expecting another rate cut at the September 4 policy decision, with a total of 76 basis points of easing anticipated by the end of 2024, up from 72 basis points before the latest inflation data.

Oil prices, a key Canadian export, fell to a 2-week low due to reduced concerns over Middle East supply and weaker fuel demand in China.

Falling oil prices and the cooling inflation rate influenced the Canadian dollar’s performance.

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