Canadian Dollar hits fresh five-month lows after mixed inflation data

• Canadian Dollar depreciates further after mixed Canadian inflation data.
• Core CPI eases to 2% YoY in March, feeding hopes that BoC might start cutting rates in June.
• Later Tuesday, Fed Chair Powell and BoC President Macklem will speak about Canadian economy in Washington.

The Canadian Dollar (CAD) is going through a sharp depreciation against a stronger Greenback on Tuesday, and the mixed Canadian Consumer Prices Index (CPI) has failed to provide any significant support. Consumer inflation accelerated in March although the Core Bank of Canada CPI rose at a slower pace than in the previous month.

These figures come in line with cooling inflationary trends last seen at the Bank of Canada's most recent monetary policy meeting, which would allow them to start cutting rates in June. This explains the negative impact on the Canadian Dollar vis-à-vis the Greenback.

Later Tuesday, BoC Governor Tiff Macklem and Federal Reserve (Fed) Chair Jerome Powell are expected to take part in a panel discussion about the Canadian economy in Washington. Any comments about the monetary policy plans of their respective banks are likely to be analyzed with particular interest.

Daily digest market movers: USD/CAD rallies further on monetary policy divergence

• Lower hopes of Fed easing in the coming months and then higher expectations that the BoC will trim rates in June are hammering the Canadian Dollar.
   
• Canadian CPI accelerated at a 0.6% pace in March and 2.9% YoY, up from 0.3% and 2.8% in the previous month.
   
• Core CPI, however, eased to a 2.0% yearly rate from 2.1% over the previous month.
   
• US Construction activity data has disappointed, with Housing Starts and Building Permits declining beyond expectations in March.
   
• US Industrial Production grew 0.4% in March, in line with market expectations and unchanged from the previous month. Capacity utilization increased to 78.4% from the downwardly revised 78.2% but below the 78.5% forecasted by experts.
   
• Fed Vice Chair Jefferson has given a neutral speech hinting at rate cuts later this year but also warning that inflation data forces it to keep rates high for a longer time.