USD/CAD on session highs, following Canadian consumer inflation report

US dollar edged higher against its Canadian counterpart on Friday, following the release of Canadian consumer inflation report, but demand for the US dollar was still under the influence of FED Chairman Ben Bernankes recent comments.

USD/CAD reached a session high at 1.0391 at 12:51 GMT, after which consolidation followed at 1.0386. Support was likely to be found at July 11th low, 1.0327, while resistance was to be met at July 18th high, 1.0439.

Earlier on Friday it was reported that the annual inflation rate in Canada accelerated in June, reaching a four-year high, supported by higher gasoline and automobile expenditures. However, the rate was still below the targeted 2%, implying that no inflationary pressure was present and Bank of Canada would not need to raise interest rates. Consumer Price Index (CPI) did not change in June compared to May, while in May compared to April it rose by 0.2%. In annual terms, consumer prices rose by 1.2% in June, meeting projections and accelerating in comparison with May, when the index increased by 0.7%.

Additionally, Canadian Core Consumer Price Index, which excludes volatile elements such as energy and food, dropped in June by 0.2% in line with preliminary estimates, after the 0.2% increase a month ago. Annually, core consumer prices rose by 1.3% during June, again matching expectations, following the 1.1% rise in the preceding month.

Meanwhile, Federal Reserve Chairman Ben Bernanke said in front of the Senate Banking Committee on Thursday that it was “way too early to make any judgment” as to whether bond purchase tapering will begin this September. He delivered his semi-annual report on monetary policy to the panel after his statement to the House Financial Services Committee the previous day, according to which the central bank will take a wait-and-see stance, regarding monetary stimulus.

“The dollar is still trading on a slightly weaker bias following the recent comments from Fed Chairman Bernanke that were slightly more dovish than we had anticipated,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, cited by Bloomberg. “Investors have been reassured that monetary policy will remain in place for the foreseeable future from the major central banks and that’s helping to restore some stability to broader financial markets.”, he also added.

The greenback saw a certain drop also because the People’s Bank of China said it would remove limits on lending rates.

Elsewhere, the loonie, as Canadian dollar is also known, was trading lower against the euro, with EUR/CAD pair advancing 0.20% to reach 1.3635 at 14:00 GMT. Ultimately, GBP/CAD cross also increased, trading 0.28% higher for the day at 1.5849 at 14:02 GMT.