Canada's dollar finished lower against the greenback on Friday after Canadian inflation data for June came in surprisingly tamely, trimming expectations that interest rates will rise later this year. Canadian inflation slowed to 3.1 percent in June from an eight-year high of 3.7 percent in May, although it was still a notch above the central bank's 1-3 percent target range.
Core inflation, which excludes volatile items such as gasoline, unexpectedly fell to 1.3 percent in June from 1.8 percent in May. "We thought things were getting a little bit more heated up for an interest rate hike sooner here in Canada and now after today's release, we're definitely looking the other way and saying a little bit later than sooner," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.
Both measures of the consumer price index dropped to the lowest year-on-year rate since February and were lower than forecast by any of the 19 analysts in a Reuters poll. Following the release of stronger-than-expected May retail sales data on Friday morning, the Canadian currency briefly pared losses made after the release of the inflation figures. But it returned to weaker levels as the CPI data dominated the market.
"The retail sales number was a good number but it's not going to drive the Bank of Canada to raise rates in and of itself," said Shane Enright, executive director, foreign exchange sales, at CIBC World Markets. The currency finished the session at C$0.9491 to the US dollar, or $1.0536, down.
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