Canadian Dollar Steady as Markets Await Inflation Data
The Canadian dollar traded flat against the U.S. dollar on Monday as rising oil prices balanced investor caution ahead of key inflation data that could shape the Bank of Canada’s policy outlook.
The loonie was nearly unchanged at 1.3814 per U.S. dollar (72.39 U.S. cents), moving within a narrow range of 1.3784 to 1.3831.
Inflation Data in Focus
Canada’s consumer price index (CPI) for July is due Tuesday. Economists expect annual inflation to ease slightly to 1.8% from 1.9% in June. However, core inflation measures—closely watched by the BoC—are expected to remain above the central bank’s 2% target.
“Tomorrow’s Canadian inflation report should remain too hot for comfort,” said Karl Schamotta, chief market strategist at Corpay. He added that the BoC’s preferred trim and median measures are likely to hover near 3%, as tariffs and resilient consumer demand continue to push prices higher.
Policy Outlook
Markets currently price a 68% chance that the Bank of Canada will hold rates steady at its September 17 meeting. The central bank has kept rates on hold since lowering the benchmark rate to 2.75% in March.
Oil Prices and Housing Data
Oil, one of Canada’s top exports, rose 0.5% to $63.11 per barrel, supporting the loonie. Meanwhile, the U.S. dollar gained against a basket of major currencies.
Canada’s housing market showed resilience, with housing starts rising 4% in July from the previous month, according to the national housing agency.
Market Positioning and Bond Yields
Speculators increased their bearish bets on the Canadian dollar to the highest level since June, data from the U.S. Commodity Futures Trading Commission showed on Friday.
The Canadian 10-year bond yield rose 2.7 basis points to 3.489%, after briefly touching 3.506%, its highest since July 30.
