Canadian dollar rallied to a three-week high against the US dollar
The Canadian dollar rallied to a three-week high against the US dollar on Friday following Canadian inflation data that was stronger than expected.
Canada’s inflation rate surged to 2.4% annually in October from September’s 2%, mainly because of higher shelter and food prices.
The inflation result is putting pressure on the Bank of Canada to reconsider its policy of maintaining low interest rates “for some time.” It doesn’t look that likely for there to be more cuts in the nearby future.
RBC assistant chief economist Paul Ferley, said:
“With this unexpected pressure on the inflation side, it raises the probability of the Bank of Canada moving into a tightening mode and a higher probability is, I think, what is providing a lift to the Canadian dollar,”
The Canadian dollar was also backed by a rise in crude prices, which increased for the first time in two months, driven by a rate cut in China and speculation that the Opec will agree to reduce oil production.
On Friday the Canadian dollar reached a high of C$1.1191 to the US dollar, or 89.36 US cents. This was a cent stronger than the day before, when it closed at C$1.1306, or 88.45 US cents. At the end of the day the Canadian dollar finished at C$1.1239, or 88.98 US cents, approximately 0.4 percent stronger against the US dollar for the week.
In the upcoming week investors can expect the latest Canadian retail sales data, which will be released on Tuesday, in addition to third-quarter gross domestic product figures, which will be released on Friday.