Cooling US inflation reduces bets on further Federal Reserve tightening, weakening the USD against the CAD.
The USD/CAD pair dropped to around 1.3790 in early European trading on Thursday, driven by a softer US Dollar. Cooling US inflation data has diminished expectations for aggressive Federal Reserve rate hikes, weighing on the greenback.
The decline follows recent US inflation prints that fell short of forecasts, reinforcing bets that the Fed may pause its tightening cycle. The CAD has also found support from a temporary pause in US-Canada trade tariffs, improving sentiment for the loonie.
Market reaction remains cautious as traders await further economic data to gauge the Fed’s next moves.