Canadian dollar weakens in anticipation of inflation data release

On Monday, there was a weakening of the Canadian dollar against the U.S. dollar. The decline was caused by falling oil prices and the American dollar strengthening against a basket of major currencies, but it was partially limited by the upcoming release of key domestic inflation data.

The Bank of Canada’s report on inflation for October will be published tomorrow, on November 16.  These data will help markets to guide their expectations for the further course of monetary policy and size of interest rate hikes, as Michael Goshko stated, senior market analyst at Convera Canada ULC.

According to forecasts, at the upcoming central bank’s meeting, which is scheduled for December 7, officials will decide to raise rates by at least a quarter of a percentage point. Thus, the rate might reach its peak of 4.25–4.50% over the next few months.

It’s also worth noting that Canadian government bond yields rose following the U.S. Treasuries. The bonds with 2-year maturity demonstrated a 6.3-basis-point growth up to 3.890%, while the bonds with 10-year maturity added 1.7 basis points, rising to 3.171%.