USD rallies following US inflation data
Daily Currency Update
Demand for the Canadian dollar continued to edge lower against the US dollar even after data released on Friday showed that the unemployment rate was at a record low in May. Red-hot inflation data from the US which gave a boost to the US dollar added pressure to the Canadian dollar. Oil prices also tumbled following the US inflation data, which didn't help the Canadian dollar. USDCAD was up 0.77% trading at 1.27946 at the time of writing.Demand for the dollar surged on Friday following release of data that showed consumer prices in the US accelerated in May. Headline inflation surprised the market to the upside rising 1% month-on-month, pushing up the annualized rate to 8.6% versus an expected 8.3%. Even excluding volatile factors like food and gasoline, core inflation came in above economist expectations, increasing 0.6% month-over-month or 6% year-over-year, versus the expected 5.9% increase. This could put more pressure on the US Federal Reserve to continue hiking interest rate hikes at a more aggressive pace than expected. The US Dollar Index was up 0.90% at around 104.15 at the time of writing.
Key Movers
The European Central Bank left interest rates unchanged as expected following the June policy meeting. Policymakers signaled that they plan to hike rates by 25 basis points in July, offering more clarity on the central bank's rate outlook. They didn't commit to a 50-basis-point rate hike in September, which put downward pressure on the euro versus a broadly strengthening US dollar. The ECB also lowered growth forecasts for 2022 and 2023 to 2.8% and 2.1%, respectively, from 3.7% and 2.8%. EURUSD was down 0.95% trading around 1.05166 at the time of writing.Expected Ranges
- EUR/CAD: 1.3445 - 1.3514 ▼
- GBP/CAD: 1.5754 - 1.588 ▼
- AUD/CAD: 0.9006 - 0.9086 ▲
- USD/CAD: 1.2659 - 1.2811 ▲