Canadian Dollar Weakens Against US Dollar Amid Hot CPI Data
The Impact of Hot U.S. CPI Data on Canadian Dollar
The Canadian dollar weakened against its U.S. counterpart as hotter than expected U.S. inflation data stirred speculation about a delayed rate cut from the Federal Reserve.
Details of U.S. Inflation Data
The U.S. Consumer Price Index rose by 3.2% last month, surpassing estimates of a 3.1% gain. Additionally, the overall consumer price index increased by 0.4% in February, aligning with expectations.
Currency Market Reaction
Adam Button, chief currency analyst at ForexLive, mentioned, “The U.S. dollar’s strength is primarily driven by the hotter inflation report, dominating the currency market today.”
Bank of Canada’s Response
Considering the Bank of Canada’s reluctance to diverge significantly from the Fed, there is continued pressure on the cooling Canadian economy. This could lead to economic risks in 2025 concerning global and Canadian growth.
Analysts’ Perspectives
Analysts at Monex Canada highlighted the BoC’s stance on prolonged high rates as a short-term shield against CAD depreciation. However, negative growth impacts could result in a scenario where the loonie consistently underperforms.
Technical Analysis of USD/CAD Pair
On a technical level, the USD/CAD pair is expected to remain range-bound in the near future. Analysts at FXStreet noted that the pair is currently oscillating between supply and demand zones, with potential bullish and bearish scenarios based on key levels.
