FX.co ★ Canadian Dollar Rebounds After Inflation

The Canadian dollar strengthened to approximately 1.39 per USD, bouncing back from a one-month low of 1.398 observed on May 14th. This movement came as markets assessed April's inflation data amid a weakened US currency. Canada's headline Consumer Price Index (CPI) decelerated to 1.7 percent year-on-year—the slowest rate in seven months—primarily due to a 12.7 percent drop in energy prices following the removal of the carbon tax and an increase in supply by OPEC. Despite this, the Bank of Canada's favored trimmed-mean core measure unexpectedly rose to 3.1 percent, marking its highest level in thirteen months. This points to persistent underlying price pressures, suggesting that an immediate easing of policy might not be forthcoming. In parallel, discussions between US Vice President Vance and Prime Minister Carney have heightened optimism for a comprehensive trade agreement, alleviating bilateral uncertainties. Additionally, the Canadian dollar was further bolstered by the broad depreciation of the US dollar following Moody's downgrade of American sovereign debt to Aa1 on May 16, contributing to fiscal concerns and a sell-off of US assets.