US Dollar Weakens Against Majors as Canada Inflation Surges
The US dollar experienced a decline against several major currencies last week, including the Canadian dollar and Australian dollar. This shift in currency values was driven by several factors, with one of the main contributors being the acceleration of Canada's July Consumer Price Index (CPI) to 3.0% YoY.
This increase surpassed forecasts, with gasoline and travel prices playing a significant role in the surge. However, the Bank of Canada maintained its cautious stance despite this inflationary pressure, citing moderation in underlying core metrics as a reason for restraint.
In contrast, the Reserve Bank of Australia (RBA) remained committed to its 'higher-for-longer' interest rate policy, with sticky core inflation keeping them constrained at 4.35%. The central bank's hawkish tone was evident in their July minutes, but markets seemed to look past this rhetoric and focus on cooler data.
As a result, FedWatch pricing for September rate targets rebounded into the 60-70% range by late August. Meanwhile, major currency pairs rallied against the US dollar, with NZD/USD leading the charge at +1.57%, followed closely by AUD/USD at +1.33%.