Cooling US inflation data reduces September Fed rate hike probability to 34.8%, weakening the USD against the CAD.
USD/CAD declined for a second day, trading near 1.3920 in Asian hours as softer US inflation data weighed on the dollar. The Bureau of Labor Statistics reported flat wholesale costs in July, below the expected 0.2% growth, while core PPI rose 0.2%, slightly under consensus.
Annual headline PPI increased 4.7% year-over-year, with core PPI up 4.2%. Markets now price a 34.8% chance of a September Fed rate hike, down from 40% post-data. US July Retail Sales figures later today may further influence expectations.
The CAD’s gains were tempered by subdued oil prices, as investors await progress on reopening the Strait of Hormuz. Crude flows continue despite diplomatic deadlock, limiting the commodity-linked currency’s upside.