The Canadian dollar strengthened toward 1.375 per US dollar approaching September highs after losing ground after fresh domestic data and recalibrated policy expectations put a floor under the currency. Advance estimates showed retail sales rising about 1.0% in August, erasing July’s 0.8% decline and signalling firmer household demand than markets feared, which reduced the odds of a steep easing cycle by the Bank of Canada. The BoC cut its policy rate 25bp to 2.5% after a sharper slowdown than expected, including a 1.6% contraction in Q2 GDP and a roughly 27% collapse in exports, while labour market deterioration with net job losses and unemployment near 7.1% in August eased wage pressures and supported the case for easier policy. At the same time the US dollar has been volatile after the Federal Reserve’s 25bp cut and Chair Powell’s cautious commentary, with the dollar first weakening then regaining strength as markets digested the Fed’s revised outlook.