Canadian Dollar Strengthens as Rate Hike Bets Cool

The Canadian dollar has been gaining strength against its U.S. counterpart as expectations for further Federal Reserve rate hikes have diminished. The probability of a rate hike at the next Federal Open Market Committee meeting has fallen to around 20%, down from nearly 35% a month ago, according to the CME FedWatch Tool.

This shift in market pricing has reduced the yield advantage of the U.S. dollar, providing some support for the Canadian dollar. The focus now shifts to the release of the latest U.S. Consumer Price Index (CPI) report, scheduled for later this week.

The data will be critical in determining whether the Fed can hold rates steady or if further action is needed. Economists expect the headline CPI to show a 3.2% year-over-year increase for October, down from 3.7% in September.