CAD Holds Steady on Soft Inflation Data

The Canadian dollar held steady at around $1.41 per USD after a softer-than-expected inflation reading for June. The drop in prices was led by a 1.4% month-over-month decline in producer prices, the sharpest since December 2023.

Annual consumer inflation eased to 2.8%, slightly below forecasts of 2.9%. The Bank of Canada's preferred core inflation measures also fell to their lowest levels in over five years, reinforcing its view that higher energy costs are not broadly impacting the economy.

The softer inflation data reduced expectations of further rate hikes by the Bank of Canada this year, limiting the yield advantage that has supported the Canadian dollar. The CAD still faces challenges from a strong USD and ongoing global economic uncertainty.