After rebounding from the two-month low, the USDCAD pair currently trades with a corrective downward pressure. This decline is due to the June US inflation readings, which were softer than anticipated. This has increased the likelihood of a Federal Reserve (Fed) rate cut in September, placing pressure on the US Dollar.
The US Inflation Reached The Multi-year Low
The Labour Department's report released on Thursday indicated that the United States' Consumer Price Index (CPI) experienced a 0.1% month-over-month decline in June. This represents the lowest level of inflation in more than three years. The headline CPI increased by 3.0% year-over-year in June, lower than the market consensus of 3.1% and lower than the 3.3% increase in May.
In contrast to the 3.4% increase in May and market expectations, the core CPI, which excludes volatile food and energy prices, increased by 3.3% year-over-year in June.
A Rate Cut Is Possible By The Fed
As a result of this data release, investors in the fed funds futures market have increased their wagers on a rate cut by the US Federal Reserve commencing in September. The odds of a September rate cut have increased from 73% on Wednesday to nearly 89%, according to the FedWatch Tool of the CME Group.
In addition, the U.S. weekly Initial Jobless Claims for the week ending July 6 decreased to 222,000 from 239,000 the previous week, the lowest level since June 1. This figure exceeded the anticipated 236,000.
