Cooling US inflation data reduces expectations for a September Federal Reserve rate increase, supporting the Canadian Dollar despite lower oil prices.
The USD/CAD pair stabilizes around 1.3940 in Asian trading, balancing a weaker US Dollar against declining oil prices. The Canadian Dollar finds support as moderating US inflation tempers aggressive Fed rate hike expectations for September.
July’s US Consumer Price Index rose 3.4% year-over-year, down from 3.5% in June, while core CPI increased 2.5%, matching forecasts. Both readings signal easing inflation pressures, reducing the likelihood of immediate Fed tightening.
Markets now price a 40.1% chance of a September rate hike, down from prior expectations, with December seen as the next potential move. The shift follows softer energy and food cost data, reinforcing a cautious Fed outlook.