FX.co ★ Canadian Dollar Hits 8-Month High

In June, the Canadian dollar strengthened to approximately 1.36 against the USD, marking its highest level in eight months. This rise was mainly attributed to a weaker US dollar, influenced by US inflation rates being lower than anticipated, which led to a reevaluation of the Federal Reserve's policy. For May, the Consumer Price Index (CPI) showed an increase of only 2.4% year-on-year, resulting in a decrease in Treasury yields and diminishing the attractiveness of the dollar for yield-seeking investors. Within Canada, the Bank of Canada decided in June to maintain its interest rates, signaling a move towards a neutral stance by discarding its tightening bias. This action narrowed the monetary policy gap with the Federal Reserve, contributing to the Canadian dollar's rise. In terms of economic performance, April saw a slight increase in industrial output and a stable employment landscape, indicating resilience in accommodating a more gradual US interest rate path. On the international trade front, renewed negotiations between the US and China, including commitments to rejuvenate the Geneva framework and remove restrictions on rare earth elements, have alleviated the global tariff concerns previously troubling Canadian exporters. Additionally, high oil prices have improved Canada's terms of trade, further bolstering the currency's upward trend.