The Canadian dollar appreciated toward 1.37 per US dollar, testing its highest levels since July as investors weighed firm domestic fundamentals against a broad softening in the US policy outlook. Inflation data showing headline CPI steady at 2.2% and the trimmed mean easing to a ten month low of 2.8% reinforced confidence that price pressures are converging toward the BoC’s target without forcing an abrupt policy shift. In that context, the Bank of Canada’s decision to hold rates at 2.25% and its view that policy is about the right level tempered expectations for aggressive near term easing. An improving external backdrop, with trade flows tracking a surplus, added further support. In contrast, the US dollar weakened as delayed labor and consumption data pointed to a cooling economy, with unemployment rising to 4.6% and retail sales stalling, prompting markets to price a higher probability of additional Fed cuts in 2026.