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Canada Inflation Rises as USDCAD Exchange Rate Dips Below 1.40 - Insights and Analysis

Canada Inflation Rises as USDCAD Exchange Rate Dips Below 1.40 - Insights and Analysis

Canada Inflation Ticks Up, USDCAD Rate Falls Below 1.40

Source: FX Leaders

  • USDCAD fell to 1.40 as the USD weakened while crude oil increased by $2.
  • The impact of rising Canadian inflation has pulled the currency pair below the 1.40 mark.

Canada’s Inflation Overview

  • Headline CPI (MoM) rose by 0.4%, exceeding the 0.3% forecast and rebounding from a -0.4% decline in September.
  • Core CPI (MoM) increased to 0.3% from 0.1%, indicating stronger price pressures.
  • Year-over-year, the Headline CPI climbed to 2.0%, slightly above the 1.9% estimate.

Technical Analysis

  • Support around the 1.3970-80 zone where the 50 SMA aligns on the H1 chart.
  • Geopolitical tensions and expectations for Federal Reserve rate cuts increased volatility, pushing USD/CAD above 1.40 last week.

Market Implications

  • The higher-than-expected inflation data reduces the chance of a 50-basis-point rate cut by the Bank of Canada from 38% to 20%.
  • The market is closely watching for future monetary policy adjustments due to inflation staying above the Bank of Canada's 2% target.

Key Takeaways

  • Increased inflation pressures in Canada may create long-term shifts in USD/CAD's performance.
  • Traders should monitor the economic calendar for upcoming inflation reports, as they can significantly impact market strategies.

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