Central Banks Weigh Inflation and Growth Amid Cooling Labor Markets

Canada's inflation rate accelerated to 3.0% YoY in July, beating forecasts and pressuring USD/CAD in the short term.

The Bank of Canada maintains a cautious stance despite the increase, balancing near-term inflationary persistence against emerging downside risks to domestic growth.

Australia's labor market saw a sharp contraction in employment, pushing unemployment up to 4.5%, and sticky core inflation keeps the Reserve Bank of Australia constrained from hiking interest rates further.

Despite hawkish FOMC minutes, markets looked past the rhetoric toward cooler data, pricing September rate cuts back into the 60%, 70% range by late August.