Canadian Dollar Drops As Easing Inflation Raises Rate Cut Hopes

The Canadian dollar weakened against its major counterparts in the New York session on Tuesday, as soft inflation data for April increased the likelihood of an interest rate cut in June.

Data from Statistics Canada showed that the consumer price index rose 2.7 percent year-on-year, down from a 2.9 percent gain in March. The reading was in line with expectations.

On a seasonally adjusted monthly basis, the CPI came in at 0.2 percent in April, down from 0.3 percent in the prior month.

Core CPI, excluding food and energy, eased to 0.1 percent from 0.2 percent last month.

Oil prices dipped on worries of interest rates staying higher for longer following hawkish comments from Fed officials.

The loonie touched 1.3675 against the greenback, setting a 1-week low. The loonie is seen finding support around the 1.38 level.

The loonie fell to near a 6-month low of 1.4834 against the euro and a 4-day low of 114.15 against the yen, from an early high of 1.4790 and a session's high of 114.83, respectively. The currency may locate support around 1.49 against the euro and 107.00 against the yen.

The loonie dropped to 0.9119 against the aussie, from an early 6-day high of 0.9067. If the currency falls further, it is likely to test support around the 0.94 region.