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17 April 2024 | FXGT.com

Canada’s Inflation Cools to 2.9%, Fuelling Speculation of Imminent BoC Rate Cut

  • USD/CAD Dynamics: The Canadian Dollar suffered losses against the US Dollar following hawkish remarks by Federal Reserve Chair Jerome Powell and the release of Canadian inflation data.

  • Inflation Below Expectations: Canada’s annual inflation rate stood at 2.9% in March, falling short of market forecasts. This, along with the core inflation measures below expectations, has fuelled speculation about potential monetary easing.

  • Bank Of Canda Rate Cut Expectations: The data has led traders to increase expectations for a rate cut by the Bank of Canada at its June meeting, considering the continuous evidence of slowing underlying inflation paired with economic softening. Current market sentiment projects the likelihood of a June rate cut at 55%.

  • Fed Chair Powell’s Hawkish Tone: Federal Reserve Chairman Jerome Powell’s recent comments emphasized the enduring strength of the US economy but also highlighted that achieving a 2% inflation target is expected to take longer than previously thought. This stance has supported the US Dollar, reducing expectations for a near-term rate cut.

  • Market Sentiment: The market is adjusting to the reality of continued restrictive policy in the US contrasted with potential easing by the Bank of Canada, which is reflected in the weakening of the CAD against the USD.
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