The Canadian dollar strengthened to around 1.41 per US dollar in October, reaching a near one-month high after the release of September inflation data. Canada’s annual inflation rate rose to 3.1%, a four-month high driven largely by higher gasoline prices, but still came in just below market expectations of 3.2%. While climbing energy costs pushed headline inflation higher, core price pressures remained subdued, with CPI-median slowing to 1.9% and CPI-trim easing to 1.8% in September.
Despite the softer-than-expected figures, the policy outlook at the Bank of Canada remained skewed toward tighter conditions, as officials continued to highlight upside risks to inflation. Governor Tiff Macklem said on Saturday that the central bank expects to raise its quarterly inflation forecast significantly this month, reinforcing earlier hawkish comments about energy-driven price pressures. In addition, expectations that the interest-rate gap between the US and Canada will narrow have lent further support to the loonie.
