FX.co ★ Canadian Dollar Attempts to Rebound

The Canadian dollar strengthened beyond 1.39 against the US dollar as it attempted to recover from a restricted trading range, hovering near the lows observed in early December. This movement came as investors processed a mixed inflation report alongside a softer US dollar. Contrary to expectations, headline inflation rose to 2.4% in December, surpassing consensus projections and slightly exceeding the Bank of Canada's short-term forecast of a Consumer Price Index (CPI) close to the 2% target. Although the median core inflation rate declined to a one-year low of 2.5%, indicating some easing in underlying price pressures, the combination of stronger headline inflation and robust demand suggests a more cautious approach to any potential rate cuts. Furthermore, the Canadian dollar gained additional support from the oil market, buoyed by steady export flows to the US, limited short-term supply growth, and a relatively tight crude balance in North America, which has contributed to stabilizing energy revenues and Canada's trade prospects. Meanwhile, the US dollar saw a decline, influenced by renewed tariff threats emanating from Washington.