Canadian Dollar Stability Tested as Inflation Comes in Below Expectations

The Canadian Dollar showed mixed signals on Monday following softer-than-expected inflation readings from Statistics Canada. USD/CAD currently trades near 1.3761 after bouncing back from an intraday low of 1.3747. For those looking at practical exchange rates, $200 Canadian converts to roughly $145 USD at current levels, reflecting the ongoing strength of the American currency despite recent weakness in the broader market.

What the Inflation Data Revealed

Canada’s November Consumer Price Index painted a complicated picture for policymakers. The headline CPI came in at 2.2% year-over-year, matching October’s reading but falling short of the anticipated 2.4%. Month-over-month, prices edged up just 0.1%, a slowdown from October’s 0.2% gain. These numbers suggest inflation is gradually aligning with the Bank of Canada’s 2% target.

The Bank of Canada’s preferred core inflation measures told a more nuanced story. Core CPI remained flat at 2.9% annually in November, though the monthly reading dipped 0.1%—a notable reversal from October’s 0.6% increase. This easing in monthly core inflation, combined with headline figures running below market expectations, reinforced the BoC’s recent decision to hold rates steady.

What This Means for Policy and Markets

The BoC signaled last week that its current policy stance sits “about the right level,” given inflation’s proximity to target and continued economic resilience. The softer inflation print validates this cautious approach, reducing immediate pressure for rate adjustments. With $200 Canadian worth watching in the context of broader currency movements, the Loonie’s limited downside reflects these balanced policy signals.

US Data Cooling, More Ahead

The Empire State Manufacturing Index added to the mixed economic picture. December’s reading plunged to -3.9 from 18.7 in November, vastly underperforming the 10.6 forecast. This sharp contraction signals manufacturing weakness in the region heading into year-end.

The economic calendar intensifies this week. Tuesday brings the delayed October and November Nonfarm Payrolls report, followed by Thursday’s Consumer Price Index release. These datasets will be critical for reshaping Federal Reserve expectations as markets look toward 2026 policy settings.

Currency Correlation Snapshot

The US Dollar posted modest gains against most major currencies Monday, with the exception of the Pound Sterling and Japanese Yen, which both held relatively steady. The New Zealand Dollar faced the steepest losses, highlighting the Greenback’s broad resilience despite tepid economic signals. CAD maintained its positioning near session lows as traders balanced softer inflation data against persistent USD strength.