US inflation remained elevated in July (5.4% year over year) but was near consensus expectations (5.3%) and not sufficiently high to impact the path of monetary policy set by the Federal Reserve. The US dollar dropped in response to the relatively tame inflation figure but some of that drop against CAD was almost immediately reversed after oil prices dipped on news that the White House had called on OPEC to increase oil production to support the global recovery from the pandemic. That has the left USD to CAD at 1.250 (CAD to USD at 0.800). In Canada, the prospect of a federal election in the near future is being discussed. Canada’s political system is considered one of the most stable in the world and politics rarely impacts the exchange rate but if the polls were to move dramatically during such an election then they could be expected to impact the Canadian dollar. For now, we do not see any impact on the exchange rate based on whether an election is called shortly or not.
