22.12.202514:05:04UTC+00Canadian Dollar Tests September Highs

The Canadian dollar firmed up towards 1.375 per US dollar, reaching its strongest point since September. This movement is underpinned by a supportive monetary and yield environment in Canada, coupled with a weakening US dollar driven by mixed economic data from the United States. Canada's economic indicators present a mixed picture; while retail sales dipped by 0.2% in October, there was a preliminary report indicating a rebound in November. This allows the Bank of Canada to justify maintaining its current policy rather than opting for an immediate rate cut. Inflation figures support this stance, with the headline Consumer Price Index (CPI) holding steady at 2.2%, and the trimmed mean CPI dropping to a ten-month low of 2.8%, boosting confidence that inflationary pressures are nearing the target. The Bank of Canada's decision to keep interest rates at 2.25%, alongside its view that current policy settings are appropriate, has dampened expectations for significant near-term rate reductions. Meanwhile, the US dollar has weakened as recent delays in labor and consumption data are indicative of a slowing economy, with unemployment rising to 4.6% and retail sales stagnating, reducing the comparative policy support for the US dollar.