The Canadian dollar weakened past 1.382 per USD in late May, its lowest in six weeks, amid a backdrop of soft inflation domestically and risks to growth. The Bank of Canada’s preferred core inflation gauges slowed more than expected to their lowest levels in five years, signaling easing underlying price pressures outside the energy sector. The data reinforced recent guidance from the central bank that energy-driven inflation may prove temporary and reduced expectations of additional rate hikes. Meanwhile, Canada’s GDP is expected to stagnate in the first quarter of 2026, further supporting expectations that the BoC will keep rates unchanged. In contrast, resilient labor market data and firmer core inflation in the US strengthened expectations that the Federal Reserve could raise interest rates again this year, supporting the US dollar.