In the realm of Asian trading hours on Thursday, the USD/CAD pair consolidates its position above the 1.3650 mark, buoyed by a confluence of factors primarily stemming from robust US inflation data for March. The Greenback surged to a yearly pinnacle of 105.30 in response to this data, bolstering the upward trajectory of the currency pair. Market sentiment is keenly attuned to further cues from the US Producer Price Index (PPI), slated for release later in the day. Projections for the headline and Core PPI figures anticipate respective year-over-year increases of 2.2% and 2.3%.
The Bank of Canada (BoC) convened for its April meeting, maintaining its key interest rate at 5% for the sixth consecutive time since July. BoC Governor Tiff Macklem, speaking at the subsequent press conference, acknowledged the encouraging momentum in inflation but underscored the need for sustained evidence before contemplating rate adjustments. While hinting at the possibility of a rate cut in June, Macklem emphasized a cautious approach contingent upon further economic developments.
In contrast, the robust uptick in US inflation surpassed expectations for March, prompting the Federal Reserve (Fed) to prolong its stance of maintaining benchmark rates at elevated levels. Data released by the Labor Department’s Bureau of Labor Statistics revealed a 0.4% month-over-month increase in the US Consumer Price Index (CPI), with the yearly CPI figure registering a 3.5% uptick. Additionally, the Core CPI, excluding volatile food and energy components, demonstrated a 0.4% month-over-month uptick and a 3.8% year-over-year surge.
Following the release of the CPI data, market sentiment regarding a potential rate cut in June underwent a notable shift, with the probability declining to 21%, down from 53% earlier in the week according to the CME FedWatch tool. The March inflation report underscores the volatility of the inflationary trajectory, suggesting a deferment of any imminent monetary policy easing. Consequently, the USD/CAD pair finds support amidst heightened uncertainties, further propelled by the US Dollar Index (DXY) ascending to yearly highs.
