The Canadian dollar strengthened against its major counterparts in the European session on Wednesday, following the release of better than expected inflation data for August.

Data from Statistics Canada showed that the inflation came in flat on a seasonally adjusted monthly basis in August, after rising 0.4 percent in the previous month. Economists had expected a 0.2 percent drop.

Core CPI, excluding food and energy, grew 0.2 percent in August, unchanged from last month.

On an annual basis, consumer prices rose an unadjusted 1.9 percent in August, following a 2.0 percent increase in July. The rate was forecast to rise 2.0 percent.

The loonie traded mixed against its major rivals in the previous session. While it held steady against the yen and the euro, it fell against the greenback. Against the aussie, it rose.

The loonie advanced to 1.3237 against the greenback, from an early low of 1.3272. The next possible resistance for the loonie is seen around the 1.30 level.

Reversing from its early lows of 0.9098 against the aussie and 1.4676 against the euro, the loonie edged up to 0.9059 and 1.4630, respectively. Next immediate resistance for the loonie is eyed around 0.89 against the aussie and 1.44 against the euro.

The loonie gained to 81.71 against the yen, off an early low of 81.54. The loonie is poised to find resistance around the 83.5 level.

Data from the Ministry of Finance showed that Japan posted a merchandise trade deficit of 136.329 billion yen in August.

That beat forecasts for a shortfall of 365.4 billion yen following the 250.7 billion yen deficit in July.

Looking ahead, at 2:00 pm ET, the Fed announces its decision on interest rates. Economists widely expect the Fed to cut federal funds rate to between 1.75 percent and 2.00 percent.

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