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CAD Falls for 10 Days Amid Inflation Concerns as BOC Mulls Rate Cut


15.10.2024
CAD Falls for 10 Days Amid Inflation Concerns as BOC Mulls Rate Cut

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3710-1.3900

Euro                 1.4970-1.5170

Sterling            1.7950-1.8170

 

WTI Oil (opening level) $70.35

For 10 consecutive days CAD has fallen against the USD. More than 2% in the last two weeks.

The Consumer Price Index (CPI) has August infaltion at 2.% from 2.5% - which hit the Bank of Canada target. Today's CPI release is the last key indicator before the Bank of Canada Oct 23 next rate decision on interest rate policy. Based on all of the economic news coming out the BOC is considering cutting another 25 to 50 bps

The underlying inflation rate in the USA was higher than forecast in Septmenber, so don't look for much relief in price pressures in the market place. We all feel the inflationary impact in our daily lives. Housing , transportation, food, etc. According to the USA Bureau of Labor Statistics, the 3 month annulaize rate moved higher to 3.1% that is the most since May according to the Bloomberg writers calculations. The Bureau of Labor Statistics reported that almost 75% of the jump was attributed to Food and Shelter. Since we all need to eat and have a place to sleep, then I know inflation is here to stay.

This leads us to the question about interst rate policy going forward. If the Canadian central banker actually reduce's the interest rates in the near term, they may find themselves regretting it. When prices rise too quickly then the tool that central bankers use to combat inflation are rising interest rates. Of course those rising interst rates come with a stronger dollar, since it attracts international investors to park their money.

Of course the opposite is true as well. Who wants to get less returns for their money in the market place. So with all this talk about lowering interest rates in Canada and the USA Federal Reserve considering holding tight on interest rates, it is no wonder to see why the CAD is now trading at 1.38, its weakest level in months.

 



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