The Canadian Dollar (CAD) underperformed its major currency peers on Friday, facing notable selling pressure as oil prices retreated sharply after reaching a fresh four-month high [1]. According to the latest currency heat map, CAD was the weakest against the New Zealand Dollar, with a 0.55% decline, and also lost ground against the US Dollar, which traded 0.1% higher to near 1.3846, marking a third consecutive day of gains for USD/CAD [1]. The WTI Oil price dropped almost 4% to near $96.50, following selling pressure above $100, which weighed on currencies from net energy exporters like Canada [1].
The correction in oil prices appears to be driven by profit-booking, despite ongoing disruptions in the global energy supply mechanism due to tensions between the United States and Iran [1]. Additionally, Iran and Gulf states are scheduled to meet on Monday to discuss a temporary deal for managing shipping through the Strait of Hormuz, according to the Financial Times [1].
On the domestic front, investors are awaiting the release of Canada's Consumer Price Index (CPI) data for August, which is set for Monday [1]. The major trigger for the USD/CAD pair during the day will be the US CPI data for August, expected at 12:30 GMT [1]. Forecasts suggest headline US inflation will remain steady at 3.4% year-on-year, with core figures dropping to 2.4% from the previous 2.5% [1]. Analysts at MUFG/BTMU highlight that the upcoming US inflation data will be pivotal for near-term Federal Reserve expectations and the US Dollar, noting that a reading in line with or stronger than forecasts could influence US rate markets [1].
CONCLUSION
The Canadian Dollar's weakness is primarily attributed to a sharp correction in oil prices and anticipation of key inflation data releases. Market participants are closely watching both Canadian and US CPI figures, which are expected to drive near-term currency movements and influence Federal Reserve policy expectations. The overall sentiment remains cautious, with medium market impact as traders await further data.