Unexpected Drop in Inflation Rate Pushes Canadian Dollar Down

The Canadian dollar had the second day of losses against the greenback after a report indicating that the inflation slowed during the last month.
The one-year inflation rate was 1.2% the past month, falling from the February’s annualized rate of 1.4%, this fact can be considered unexpected, since forecasts were indicating stability regarding the inflation. The current recession and credit crisis striking Canada are influencing consumer demands, which in order to maintain their budgets balanced, are less likely to spend, and, as a consequence, there is a decrease in prices.
Traders are focused on next week events, when the Bank of Canada will decide its interest rate policy. Analysts are expecting the rates to be unchanged, and, according to the currency fundamentals, optimistic forecasts prevail for the mid-term future. Despite the good predictions for the Canadian dollar, economists are expecting the inflation to shrink, which could bring more uncertainties and instability to the country’s economy as a whole.
The USD/CAD ended the week at 1.2128 rising from 1.2092 in the intraday. The Canadian currency also went down in other markets, being the AUD/CAD traded at 0.8759 from 0.8695 and the CAD/JPY traded at 81.70 from 82.12.

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