Canadian dollar pulls back from one-month high as inflation cools
FXC•Bond market moves
Canadian government bond yields were mixed across a steeper curve. The 2-year CA2YT=RR eased 1.9 basis points to 2.850%, while it fell 7 basis points further below the U.S. equivalent to a gap of about 137 basis points in favor of the U.S. note.
Inflation, rates and market positioning
Canada's annual inflation rate cooled to 2.8% in June from a 29-month high of 3.2% in May, as gasoline costs fell sharply. Measures of underlying inflation closely watched by the BoC also eased.
"The inflation came in softer data than expected, and it's not just the headline," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. "The market feels confident of no rate hike until maybe the end of the year."
Chances that the BoC would hike by December eased to 66% from 72% before the inflation report, swap market data showed. 0#CADIRPR
The price of oil CLc1, one of Canada's major exports, edged 0.4% lower to $82.16 a barrel. Hopes of renewed U.S.-Iran negotiations were countered by Yemen's Houthis declaring a naval blockade against Saudi Arabia.
Speculators have raised bearish bets on the Canadian dollar to the highest level since January 2025, data from the U.S. Commodity Futures Trading Commission showed on Friday. Non-commercial net short positions rose to 176,279 contracts as of July 14, up from 173,126 in the prior week. 1090741NNET
Canadian dollar eases after softer inflation data
The Canadian dollar weakened against its U.S. counterpart on Monday as domestic data showed inflation easing, reducing expectations for Bank of Canada interest rate hikes this year.
The loonie CAD= was trading 0.3% lower at 1.4060 per U.S. dollar, or 71.12 U.S. cents, pulling back from its strongest intraday level since June 17 at 1.4001.
