On Thursday, the Canadian dollar faced significant downward pressure following the release of the US Consumer Price Index (CPI). The report recorded inflation levels that were higher and more persistent than the already adjusted upward expectations of investors. This strengthens the notion that the US Federal Reserve might either persist with its rate hikes or keep them at high levels for a prolonged duration, especially when benchmarked against most other developed economies. In general, higher interest rates in the U.S. amplify the attractiveness of the U.S. dollar to international investors, making it more enticing relative to other assets, including the Canadian dollar.
By Friday, the Canadian dollar began its recovery, regaining some of the ground lost to the US dollar. This upturn was fueled by a surge in oil prices, which climbed amidst growing concerns over a potential amplification and deepening of the conflict in the Middle East. The Canadian dollar gained further traction after the Bank of Canada’s (BoC) Governor, Tiff Macklem, stressed in a press conference that the BoC is unwaveringly devoted to “doing what needs to be done” to rein in inflation. This implies that Canada might also roll out additional interest rate increases, helping the Canadian dollar stay in step with the US dollar.
The Canadian dollar is currently trading at 1.3659 against the US Dollar.
