USD/CAD Consolidates as Canadian Inflation Falls Short of Expectations

The US Dollar steadies against the Canadian currency on Monday following weaker-than-anticipated inflation readings from Statistics Canada. The USD/CAD pair hovers around 1.3761 after bouncing from an intraday bottom near 1.3747, with the softer price growth data limiting upside momentum for the Loonie despite broader weakness in the Greenback.

Inflation Data Cools Expectations for Rate Hikes

Statistics Canada released its November Consumer Price Index (CPI), revealing headline inflation climbed 2.2% annually—matching October’s pace but undercutting the 2.4% consensus forecast. The monthly CPI reading ticked up just 0.1%, a deceleration from October’s 0.2% gain, signaling moderating price pressures across the economy.

The Bank of Canada’s core inflation measures painted a mixed picture. Core CPI remained flat at 2.9% year-over-year for November, though the monthly gauge posted a sharp 0.1% decline, reversing sharply from October’s 0.6% jump. This combination suggests inflation is gradually aligning with the BoC’s 2% target band.

What This Means for CAD Traders

At the current USD/CAD level of 1.3761, converting $200 Canadian to US dollars yields approximately $145.50 USD. This exchange rate reflects the BoC’s accommodative policy stance, reinforced by last week’s decision to hold rates steady. Officials stated that current policy remains “appropriately calibrated,” noting inflation proximity to target and resilience in economic indicators.

US Economic Calendar Picks Up Momentum

Meanwhile, the US Empire State Manufacturing Index disappointed sharply, plunging to -3.9 in December from 18.7 previously, far undershooting the 10.6 forecast. However, the real test ahead lies in this week’s delayed Nonfarm Payrolls report (Tuesday) and Thursday’s Consumer Price Index release, both critical for shaping Federal Reserve expectations into 2026.

Currency Strength Matrix

The US Dollar showed mixed performance against major currencies on the day, strengthening 0.09% against the Australian Dollar and 0.10% against the Swiss Franc, while paring minimal losses against the Japanese Yen (0.00%) and Canadian Dollar (-0.01%). The New Zealand Dollar absorbed the Greenback’s strongest pressure with a -0.09% move, underscoring relative USD resilience despite broader headwinds.

Looking ahead, USD/CAD traders should monitor incoming US jobs data and inflation reports, which could reignite volatility in the pair as markets recalibrate policy expectations for both central banks.