Canadian Dollar Weakens as Inflation Data Reduces Rate Hike Odds

The Canadian dollar weakened at the start of the trading week due to positive inflation data that has reduced the likelihood of an interest rate hike by the Bank of Canada in October.

In August, Statistics Canada reported that the annual inflation rate remained unchanged at 3%, while on a monthly basis, the consumer price index fell 0.1% below the consensus estimate of 0%

Elevated energy costs, driven primarily by gasoline prices surging almost 23%, and grocery prices jumping 2.8% contributed to the inflation rate.

The Bank of Canada's October policy meeting now seems less likely to see an interest rate hike due to this data, but economists still believe a new tightening cycle could be on the horizon amid upside inflation risks and stronger economic growth.