Canadian Dollar strengthens ahead of Canadian CPI inflation release
The USD/CAD pair extends its downside to around 1.3685 during the early European trading hours on Friday. Reports of a ceasefire between Israel and Lebanon reduce safe-haven demand for the US Dollar (USD). The Canadian March Consumer Price Index (CPI) inflation data will be in the spotlight later on Friday.
US President Donald Trump said on Thursday that the US and Iran are "very close" to making a deal and that negotiations could resume as early as this weekend. His remarks came as a 10-day ceasefire between Israel and Lebanon had taken effect. Traders will also keep an eye on a second round of talks between the US and Iran that could take place this weekend. Any signs of hope for peace in the Middle East could weigh on the Greenback in the near term.
Rising crude oil prices and supply disruptions related to the Middle East conflict are expected to drive gasoline prices up significantly in the March report. BMO Capital Markets analysts suggested that these energy costs could push headline inflation back toward 3% in the coming months.
The Bank of Canada (BoC) Governor Tiff Macklem said that the central bank will "look through" immediate inflation spikes from higher energy prices but stands ready to respond if these pressures broaden into the wider economy.
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