Canadian Dollar Steady Amid Hotter Inflation Data

The Canadian dollar held steady after inflation in Canada accelerated to 3.0% year over year, driven by higher energy costs. The July CPI reading came in above expectations at 2.9%, with a significant monthly gain of 0.5%. Gasoline prices surged 25.7% year over year, while air transportation costs increased 12.0%. Despite the hotter data, markets showed little reaction, and the Canadian dollar only firmed modestly.

The Bank of Canada's preferred core measures remained contained, with CPI-trim at 1.9% and CPI-median at 2.0%. This suggests that policymakers may continue to hold rates steady, as long as energy prices do not feed into broader inflation. The next rate decision is scheduled for September 2.

The focus will shift to the UK's inflation report on Wednesday, where a rise to 2.9% is expected. Market attention will be on whether inflation is primarily driven by higher oil prices or if it has filtered through to core measures.