Canadian Dollar sees fresh lows for the week, pushed into the floorboards as US CPI inflation fears reignite


  • The Canadian Dollar is slumping against the US Dollar as markets scatter after a US CPI data beat.
  • An uptick in US consumer prices is sending US Treasury yields higher as investors fear further Fed rate hikes.
  • The Canadian Dollar finds little support in the inflation rush into safer assets.

The Canadian Dollar (CAD) has tumbled against the US Dollar (USD) on Thursday following a bumper reading for the US Consumer Price Index (CPI) inflation, sending the USD/CAD pair into testing the 1.3700 handle as the DXY US Dollar Index soars in the US market session.

Economic data for Canada remains thin on the calendar, with nothing else in the pipe for the rest of the week.

Annual US CPI held steady in September, while investors were hoping for another tick lower.

With US inflation holding higher for longer than investors had expected, concerns that the Federal Reserve (Fed) could push further rate hikes down the chute are sending traders scattering into the safe haven of the USD, taking the broader market lower and sending the CAD into the week’s lows.

Daily Digest Market Movers: Canadian Dollar slumps in US CPI inflation flight

  • US CPI inflation snubbed market expectations of further price cooling.
  • US CPI inflation increased 0.4% for September on month, less than the 0.6% but above the market’s expected 0.3%.
  • The annual figure into September also beat expectations, printing steady at 3.7% against the forecast of 3.6%.
  • US Initial Jobless Claims also held steady at the previous week revised 209K versus the forecast 210K.
  • Canadian data is absent from the rest of the week’s economic calendar after Wednesday’s Building Permits showed a surprise uptick to 3.4% against the anticipated 0.5% and the previous decline of 3.8%.
  • Crude Oil prices are struggling to develop firm bids after US CPI data, further draining support for the Loonie.
  • WTI Crude Oil rose towards $84.00 before falling back into the day’s midrange near $82.50 after US inflation figures sent the market into a tailspin.
  • Canadian consumers pare back spending – RBC

Technical Analysis: Canadian Dollar slumps as investors pile into US Dollar, USD/CAD taps 1.3700

The USD/CAD pair is up 0.7% on Thursday into 1.3690, with the day’s high sitting close by at 1.3701, north of the 200-hour Simple Moving Average (SMA) near 1.3662.

The USD/CAD started Thursday with an early low at 1.3571, and the pair springboarded off near-term support from the 1.3580 level.

On the daily candlesticks, an extension of the USD’s bullish bounce will see the USD/CAD build out a push back into the month’s highs near 1.3775, with technical support propping up prices from the 50-day SMA currently rising into 1.3550.

Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.