Canadian Dollar Surges as US Inflation Data Falls Short
The Canadian dollar has been gaining strength this week on the back of benign US inflation data. The recent drop in US PPI and CPI numbers, both lower than expected, has supported the bearish outlook for the US economy.
Negotiations between the US and Canada regarding the 50% tariff imposed by President Trump are ongoing, with the deadline looming on August 19. Despite this uncertainty, the odds of a Fed rate hike in September have decreased significantly, from around 60% to just 30%, thanks to weak jobs data and soft inflation reports.
The Cleveland Fed's President Hammack has pushed back against the notion that tighter policy is needed for 2% inflation, contradicting the consensus view. Meanwhile, equity markets in Asia closed with mixed results, while the US dollar traded lower across the board.