FX.co ★ Canadian Dollar Loses Ground After Inflation Data

The Canadian dollar weakened toward 1.367 per US dollar, retreating after briefly testing the 16‑month highs seen in late January, as softer domestic inflation and diminishing terms‑of‑trade support undercut both its policy and commodity backing. January CPI slowed to 2.3%, while the Bank of Canada’s trimmed mean eased to 2.4%, with gasoline prices plunging 16.7% year over year and shelter inflation cooling. This reinforces evidence that price pressures are moderating and further reduces the likelihood of renewed policy tightening. With the policy rate at 2.25% and officials indicating that current settings are broadly appropriate, markets are flattening the expected rate path, eroding Canada’s relative yield advantage. At the same time, crude oil faces fresh supply headwinds as OPEC+ considers resuming output increases in April, limiting upside for one of Canada’s key exports and weakening the terms‑of‑trade channel that typically supports the loonie.