Canadian Dollar Steadies as Inflation Data Softens the Case for Rate Hikes

The CAD holds its ground against the USD on Monday following Canada’s cooler-than-expected inflation report, though the currency pair is still finding resistance. At current levels, USD/CAD is hovering around 1.3761, bouncing back from an intraday low near 1.3747, as market participants reassess expectations for the Bank of Canada’s next policy moves. The weaker headline inflation figure has tempered bullish pressure on the Loonie, despite widespread weakness across the Greenback.

Statistics Canada’s latest inflation report revealed headline CPI growth of 2.2% year-over-year in November—a miss against economist forecasts of 2.4%, though unchanged from October’s reading. The monthly print came in at 0.1%, marking a deceleration from the previous month’s 0.2% gain. For those tracking the 8 CAD to USD conversion rate, this softer inflation backdrop suggests limited room for aggressive tightening from Canadian policymakers.

Core inflation measures painted a mixed picture for policy guidance. The BoC’s closely-watched core CPI held steady at 2.9% YoY, while the monthly core metric actually reversed course, declining 0.1% after a 0.6% jump in October. These readings underscore that price pressures are approaching the central bank’s 2% comfort zone.

The Bank of Canada’s recent decision to maintain interest rates reflects these softer inflation dynamics. Officials characterized the current stance as “appropriately calibrated,” noting that inflation remains near target while underlying economic momentum shows signs of persistence. This dovish tilt limits upside potential for the Loonie, which depends on rate differentials versus the USD.

Across the border, US economic data offered mixed signals. The New York Empire State Manufacturing Index for December slumped to -3.9 from 18.7, significantly disappointing expectations of 10.6 and suggesting manufacturing activity has sharply contracted. However, the US calendar is poised to heat up this week, with several key reports on deck that could reshape Federal Reserve expectations heading into 2026.

Tuesday brings the delayed October and November Nonfarm Payrolls report, a critical barometer for labor market health. Following closely on Thursday is the US Consumer Price Index release, which will likely influence Fed policy trajectory. These incoming data points could inject fresh volatility into USD/CAD as traders recalibrate their views on comparative monetary policy.

Currency Performance Snapshot

The US Dollar registered mixed performance against major currencies today, posting a 0% change against CAD while gaining 0.09% on the Australian Dollar and 0.10% on the Swiss Franc. The Dollar showed its strongest advantage against the New Zealand Dollar at 0.09%, though it faced headwinds against the Japanese Yen (-0.59%) and British Pound (-0.19%). The EUR/USD pair saw the Dollar edge 0.12% weaker, reflecting broad-based pressure on the Greenback despite Fed rate advantage expectations.

Among commodity currencies, the Canadian Dollar’s relative stability reflects the balanced forces at play—softer inflation removing tightening urgency, yet a resilient economy preventing sharp depreciation. Traders positioning for 8 CAD to USD exposure should monitor upcoming employment and inflation data closely, as these metrics will ultimately determine whether the Fed maintains its restrictive stance or signals flexibility into the new year.