FX.co ★ Canadian Dollar Rebounds From 2-Month Lows

The Canadian dollar appreciated, moving past 1.39 against the US dollar, recovering from the two-month trough observed on August 21st. This improvement was primarily driven by a broad weakness in the US dollar, which outweighed the uninspiring domestic data from Canada. The markets almost certainly anticipated a rate cut by the Federal Reserve in September, following remarks by Chair Jerome Powell. He highlighted emerging risks in the labor market, while also cautioning that inflation expectations might still become unstable. This balanced approach solidified predictions for rate cuts in the upcoming month and signaled further easing in the fourth quarter. In Canada, expectations similarly shifted towards a dovish stance for the Bank of Canada. Retail sales were expected to decline by 0.8% in July, marking the second-largest drop in over a year; this highlights ongoing volatility in retail, influenced by uncertainties in US trade. The Core Trimmed-Mean inflation steadied at 3.0%, contrary to the forecast of 3.1%, and labor statistics revealed an unexpected decrease of 41,000 jobs in July, compared to the projected gain of 13,500. This left the unemployment rate unchanged at 6.9%, all of which strengthens the argument for a more accommodating policy approach.