FX.co ★ Canadian Dollar Strengthens to 7-Month High

The Canadian dollar appreciated to 1.375 per USD by late May, a peak not seen since October 2024, buoyed by expectations of a less accommodating stance from the Bank of Canada (BoC) which amplified the effect of a softening US dollar. Canadian retail sales increased by 0.5% in April, continuing the 0.8% rise observed in March, demonstrating a robust consumer base in Canada despite stringent tariffs imposed by the United States, which the newly instated Canadian government reciprocated. This uptick followed the release of new Consumer Price Index (CPI) data showing an unexpected rise in the BoC’s preferred measures of core inflation for April. Specifically, the trimmed-mean core rate climbed to 3.1%, marking its highest level in over a year, leading rate derivative markets to anticipate a pause at the central bank’s upcoming June meeting, rather than an additional 25 basis point cut. Meanwhile, the US dollar continued its weakness after the lower house passed a tax bill projected to further expand the federal budget deficit, thereby enhancing the Canadian dollar's strength.