Canadian dollar corrects post US Consumer Sentiment data

The Canadian Dollar has reacted to the latest performance by the US Dollar as well as the expectations on the US interest rates, leading to a rebound in the USD/CAD exchange rate.

The Michigan Consumer Sentiment Index for June beat expectations, improving the US economy’s outlook and supporting the US dollar. The US Bureau of Labour Statistics released PPI data for June, but the results came out lower than expected.

The softer inflation data supports the narrative initiated by Wednesday’s Consumer Price Index data miss. The CME FedWatch Tool calculates probabilities of future rate decisions based on the price of Fed Funds Futures.

The US PPI dropped to 0.1% YoY, falling way below estimates of 0.4%. Core PPI (excluding Food & Energy) slowed to 2.4% from 2.8% at the same time in 2022, below estimates of 2.6%.

The Canadian Dollar also traded higher after the BoC raised interest rates by 0.25%, bringing the overnight rate to 5.0% at its meeting on Wednesday. Governor Tiff Macklem stressed future policy decisions would be dependent on incoming data, leaving markets unclear on whether this would be the BoC’s last hike in the tightening cycle.