Canadian Dollar Higher After Soft U.S. Inflation Data

(RTTNews) - The Canadian dollar strengthened against its major counterparts in the New York session on Wednesday, as U.S. inflation report came in cooler than expected in February, suggesting that the Federal Reserve will resume rate cuts in June.

The consumer price index crept up by 0.2 percent in February after climbing by 0.5 percent in January. Economists had expected consumer prices to rise by 0.3 percent.

The annual rate of consumer price growth slowed to 2.8 percent in February from 3.0 percent in January. Economists had expected the pace of price growth to edge down to 2.9 percent.

Traders are pricing in 74 basis points of easing by the Fed by the end of the year.

The Bank of Canada announced its widely expected decision to lower interest rates by another 25 basis points, making its seventh straight rate cut.

The Bank of Canada said it decided to reduce its target for the overnight rate to 2.75%, with the Bank Rate at 3% and the deposit rate at 2.7%.

While the central bank noted Canadian economic growth has come in stronger than expected, it warned the pervasive uncertainty created by continuously changing U.S. tariff threats is restraining consumers' spending intentions and businesses' plans to hire and invest.

The loonie advanced to a 2-day high of 1.4368 against the greenback and a 5-day high of 103.64 against the yen. The currency is seen finding resistance around 1.38 against the greenback and 106.00 against the yen.

The loonie edged up to 1.5655 against the euro and 0.9044 against the aussie. The currency is poised to challenge resistance around 1.52 against the euro and 0.89 against the aussie.