Inflation climbs to highest level since 1983
Wednesday 22 June, 2022
Daily Currency UpdateThe Canadian dollar weakened against the US dollar on Wednesday after the release of record inflation data and as oil prices continued to cool.
Annual inflation in Canada climbed to 7.7% in May versus an expected 7.3% increase, the highest level since 1983. This adds pressure on the Bank of Canada to hike interest rates more aggressively in the medium term. Statistics Canada reported that the surge in the price of gasoline was a factor in the inflation rate uptick.
USDCAD was up 0.14% trading around 1.2934 at the time of writing.
Key MoversDemand for the US dollar weakened against a basket of currencies on Wednesday as US Federal Reserve chair Jerome Powell testified on the Semi-Annual Monetary Policy Report before the Senate Banking Committee. Powell reiterated that the central bank will continue raising interest rates to curb inflation. “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook,” Powell said as part of prepared comments. Latest forecasts released last week show that rates could roughly double in the second half of the year between 3.25% to 3.5%. The US Dollar Index was down 0.46% trading around 103.96 at the time of writing.
EURUSD and GBPUSD climbed on Wednesday following Powell's testimony, which failed to give a boost to the US dollar. EURUSD pushed back up to 1.06, while GBPUSD advanced to 1.23 at the time of writing. The pound initially fell in London trading following the release of UK CPI data, which climbed to 9.1%. The core reading, which strips out energy and fuel costs, fell from 6.2% to 5.9%, highlighting the surge in energy prices.
- EUR/CAD: 1.3602 - 1.371 ▲
- GBP/CAD: 1.5802 - 1.5925 ▲
- AUD/CAD: 0.8941 - 0.9021 ▼
- USD/CAD: 1.2914 - 1.2994 ▲