Loonie extends gains to six-week high after strong inflation data

Canadian dollar rose in American trade on Tuesday against a basket of major rivals, extending gains for the second day against US dollar and hitting a six-week high following strong Canadian inflation data, which renewed inflationary pressures on Bank of Canada.

The increasing inflationary pressures coincide with higher global oil prices, which hit ten-month highs, bolstering the case for another 0.25% interest rate hike by Bank of Canada in October.

USD/CAD

USD/CAD fell 0.8% to 1.3380, the lowest since August 10, with a session-high at 1.3490, after rising 0.3% on Monday, the sixth profit in seven sessions as global oil prices rallied. 

Canadian Inflation

Recent data renewed the inflationary pressures on Bank of Canada's policymakers and could force them to resume the cycle of policy tightening soon.

Canada's consumer prices rose 4% y/y in August, the highest in four months, passing  estimates of 3.8%. 

Core prices rose 3.3% in August, up from 3.2% in July.

Global Oil Prices

Global oil prices rallied on Tuesday for the eighth straight session, scaling a ten-month high and on track for $100 a barrel according to many estimates.

Canadian Rate Prospects 

Renewed inflationary pressures as oil prices surge worldwide are likely to force Bank of Canada to raise interest rates once more at the October meeting.