Canadian Dollar Falls to 1.4210 as Oil Slips and Bets on U.S. Rate Hike Grow

Key Facts

The Canadian dollar fell to 1.4210 against the U.S. dollar during trading on November 10, its weakest intraday level since October 15, according to market data cited by Reuters. The decline came as oil prices fell, weighing on one of Canada’s biggest exports, and investors watched the interest-rate outlook in the United States and Canada. Reuters reported that markets had fully priced in a U.S. rate hike in December. By contrast, the odds of a move by the Bank of Canada that month remained below 50%. The divergence in policy expectations is among the factors markets are monitoring as the currency pair moves.

Data from the U.S. Bureau of Labor Statistics showed the Consumer Price Index rose 0.4% in October, after a 0.6% increase in September. The core index, which excludes food and energy, rose 0.3% in October, the same monthly increase recorded in September and August. The figures show headline inflation slowing from the previous month, while the core index continued to rise at the same monthly pace for three consecutive months. The bureau said the shelter index increased 0.3%, accounting for more than 30% of the monthly increase in the overall index. The food index rose 0.5% and the energy index increased 0.7% during the month.

Concerns about tighter monetary policy had been linked to comments made before the inflation data was released, according to an Associated Press report. Federal Reserve Governor Christopher Waller said a half-percentage-point rate hike at the next meeting remained a possibility. The report described the increase as twice the usual quarter-percentage-point move. This comes as Reuters reported that investors had fully priced in a U.S. hike in December, while the odds of a Bank of Canada move remained below 50%. The differing market expectations for the two decisions offer contrasting readings of the monetary policy outlook in the two countries, as the Canadian dollar weakened against the U.S. dollar.

In energy markets, U.S. crude futures fell about 1% to $86.02 a barrel on November 10, while prices dropped to a two-month low, according to Reuters. The news agency linked the oil decline to reduced concerns about supply disruptions after U.S. officials played down the need for further military action against Iran. U.S. President Donald Trump said a renewed U.S. military campaign against Iran was

highly unlikely.

Brent crude futures had fallen to $92 on November 9 amid optimism that the conflict could end, according to Axios. In another account of market moves on November 10, OilPrice.com reported that Brent fell 0.66% and West Texas Intermediate crude dropped 0.55% at 4:24 p.m. Eastern time.