C$ retreats from 100-day moving average as inflation holds steady

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TORONTO — The Canadian dollar weakened against its U.S. counterpart on Wednesday as investors took stock of recent gains and domestic inflation data left the door open to a smaller interest rate hike by the Bank of Canada at a policy decision next month.

The loonie was trading 0.3% lower at 1.3330 to the greenback, or 75.02 U.S. cents, after moving in a range of 1.3229 to 1.3347.

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On Tuesday, it touched an eight-week high at 1.3225, close to its 100-day moving average.

“After last week’s pretty impressive run for the Canadian dollar the market is now just holding (above) the 100-day moving average,” said Amo Sahota, director at Klarity FX in San Francisco.

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That level is “a good area of support” for USD-CAD, Sahota added.

Canada’s annual inflation rate held steady at 6.9% in October, matching analyst forecasts, while core inflation measures were mixed, Statistics Canada data showed.

Money markets have fully priced in a 25 basis point interest rate hike by the BoC at its next policy announcement on Dec. 7 and see a 35% chance of a larger hike of 50 basis points, up from about 30% before the data.

The central bank hiked by 50 basis points last month, lifting its policy rate to a 14-year high of 3.75%.

The price of oil, one of Canada’s major exports, fell as geopolitical tensions were offset by concerns over rising COVID-19 cases in China. U.S. crude oil futures settled 1.5% lower at $85.59 a barrel.

Canadian government bond yields were mixed across a more deeply inverted curve.

The 10-year eased 6.2 basis points to 3.059%, while it was trading 7.7 basis points further below the 2-year rate to a gap of nearly 80 basis points. That was its largest in Refinitiv data going back to 1994. (Reporting by Fergal Smith; Editing by Barbara Lewis and Will Dunham)