Canadian Dollar Gains Ground Ahead of BoC Inflation Data

The Canadian dollar has gained ground against its US counterpart as markets await Canada's July inflation data, set to test the Bank of Canada's (BoC) outlook on interest rates.

USD/CAD declined by 0.11% on Monday, with investors scaling back expectations of further monetary tightening by the Federal Reserve (Fed), due in part to a series of disappointing US economic releases.

The BoC kept its policy rate unchanged at 2.25% for the sixth consecutive meeting in July, with Governor Tiff Macklem stating that the central bank could look through short-term energy shocks while stressing it would not allow higher energy prices to translate into persistent inflation.

Strategists at Brown Brothers Harriman expect headline CPI to rise 2.9% YoY in July, compared to 2.8% in June, and core CPI (ex. food & energy) is expected at 1.8% y/y vs. 1.8% in June.