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USD/CAD climbed during the US session, but fell below the 1.3600 mark after Canadian data showed that deflationary processes continued. At press time, USD/CAD was trading at 1.3565 after hitting a new year-to-date high of 1.3613.
Canadian dollar on the defensive as market players look to Bank of Canada for first rate cut in June
Economic events in Canada include the release of inflation data, with annual inflation below the 3% threshold. The consumer price index rose 0.3% monthly, missing expectations of 0.6%. Core inflation, the Bank of Canada’s (BoC) preferred inflation measure, fell to 2.1% from 2.4% in the 12 months to February.
The data led to a rebound in USD/CAD amid speculation that the Bank of Canada could cut interest rates earlier than expected. Meanwhile, money market futures data showed there was a 73.0% chance of the Bank of Canada cutting interest rates for the first time at its June meeting, according to Capital Edge and Refinitiv data.
The latest economic data shows signs of strength in the U.S. housing industry. Building permits rose 1.9% monthly in February, from 1.489 million to 1.496 million. Meanwhile, housing starts jumped 10.7% in February, beating estimates of 8.2%.
USD/CAD traders brace for Wednesday’s Federal Reserve decision. Futures data showed the Federal Reserve kept interest rates unchanged, but uncertainty lies in whether to update its summary of economic forecasts. Some analysts believe that Fed policymakers may not consider cutting interest rates and keep interest rates at higher levels for longer.
