• Annual inflation in Canada rose at a stronger pace than expected in August.
• USD/CAD trades deep in negative territory near 1.3400 after the data.

Inflation in Canada, as measured by the change in the Consumer Price Index (CPI), rose to 4% on a yearly basis in August from 3.3% in July. This reading came in higher than the market expectation of 3.8%. On a monthly basis, the CPI rose 0.4%, compared to analysts' estimate for an increase of 0.2%.

Moreover, the Bank of Canada reported that the monthly Core CPI, which excludes volatile food and energy prices, rose 0.1%, while the annual Core CPI edged higher to 3.3% from 3.2%.

Market reaction

USD/CAD edged lower with the immediate reaction and was last seen losing 0.65% on the day at 1.3400.