• USD/CAD dives as Canadian inflation turns out sticky.
• The BoC would endorse higher interest rates for longer period.
• Fed Daly said rate cuts are appropriate in 2024 amid improvement in inflation.

The USD/CAD pair falls sharply to near 1.3350 as the Statistics Canada has surprisingly reported a sticky Consumer Price Index (CPI) report for November. Monthly and annual headline inflation grew at a steady pace of 0.1% and 3.1% respectively. The market participants projected a decline in monthly figure by 0.2% and softening of annual inflation to 2.9%.

Monthly core CPI that strips off volatile food and oil prices grew by 0.1%. The annual underlying inflation rose marginally to 2.8% vs. 2.7% recorded previously. This would allow the Bank of Canada (BoC) to endorse for ‘higher interest rates for longer’ message.

The S&P500 opens on a flat note, portraying a quiet market mood. The US Dollar Index (DXY) falls slightly after consolidating near 102.50 as the context of ‘rate cuts’ by the Federal Reserve (Fed) outweighs.

San Francisco Fed Bank President Mary Daly said on Monday that rate cuts are appropriate in 2024 because of significant improvement in inflation declining towards 2% this year. Mary Daly endorsed decline in borrowing rates by 75 basis points (bps) as projected by other policymakers.

Later this week, investors will focus on the US Core Personal Consumption Expenditures price index (PCE) data for November, which will be published on Friday. As per the consensus, monthly core PCE data is seen growing at a steady pace of 0.2%. Fed’s preferred inflation tool is expected to decline to 3.3% against the former reading of 3.5%.