By tredu.com • 6/24/2025
Tredu
The USD/CAD pair retreats to 1.3700 during Tuesday’s European session after touching a high of 1.3800 the previous day. The Canadian Dollar strengthens slightly as traders position ahead of a crucial inflation release that could set the tone for the Bank of Canada’s July rate decision.
Scheduled for release at 1:30 PM London time, Canada’s May Consumer Price Index (CPI) is expected to come in at 1.7% year-over-year, unchanged from April. However, more attention is on core inflation measures — particularly trimmed and median CPI, projected to dip slightly to 3.0% from 3.15%.
The BoC has signaled concern that inflation may remain “firmer than previously thought,” making today’s CPI reading a pivotal input for policymakers weighing a potential 25bps rate cut at the July 30 meeting.
Interest rate swaps now price in a 39% probability of a 25bps cut in July, with expectations of between 25 and 50bps of easing over the next year. The projected terminal rate is between 2.25% and 2.50%, according to current market positioning.
This shift in sentiment has dampened demand for the US Dollar, especially as Fed officials turn dovish, and global risk appetite improves following the Israel-Iran ceasefire.
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