Investors trim Fed rate hike bets as US data weakens, while Canada’s July CPI may influence BoC policy outlook.
USD/CAD slipped 0.11% to 1.3860 on Monday, extending losses as the US Dollar weakened against the Canadian Dollar. Markets scaled back expectations for further Federal Reserve tightening after disappointing US economic data, including a surprise drop in Retail Sales.
The CME FedWatch tool now shows a 30% chance of a Fed rate hike at the next meeting, down from nearly 40% a week earlier. Canada’s July Consumer Price Index (CPI) is due later Monday, with headline inflation expected to rise 2.9% YoY, up from 2.8% in June.
A stronger-than-expected CPI print could reinforce the Bank of Canada’s cautious stance, following its decision to hold rates at 2.25% in July. BoC Governor Tiff Macklem indicated the bank may tolerate short-term energy shocks but remains vigilant against persistent inflation.