Investing.com - The broadly stronger U.S. dollar gained ground against the Canadian dollar on Friday, despite data showing that the annual rate of core inflation in Canada rose at the fastest rate in over two years last month.
USD/CAD was up 0.14% to 1.0951 in late trade, off highs of 1.0980.
Demand for the greenback continued to be underpinned as indications that the economic recovery is making solid progress fuelled expectations that the Federal Reserve will hike interest rates sooner than markets are expecting.
On Wednesday the Fed offered fresh guidance on its plans to raise interest rates, outlining in more detail how it will start to raise short term interest rates when the time comes.
The Fed statement reiterated that it expects rates to remain on hold for a "considerable time", after its bond purchasing program ends, while Chair Janet Yellen stressed that the timing of any change in interest rates is dependent on the strength of the economic recovery.
The Fed also cut its monthly asset purchase program by another $10 billion, keeping the program on track to finish next month.
The loonie, as the Canadian dollar is also known, found some support after official data showed that the annual core inflation rate, which excludes volatile items such as some food and energy costs, rose 2.1% in August. It was the highest level since April 2012, and outstripped forecasts for a 1.8% increase.
The annual headline rate of inflation rose 2.1% last month, in line with forecasts and unchanged from July.
The strong increase in core inflation boosted expectations that the Bank of Canada may shift away from its neutral stance on interest rates sooner than expected.
Earlier in the week, BoC Governor Stephen Poloz said he was in no hurry to move away from the central bank's neutral rate stance amid indications that a slow recovery in Canadian exports is underway.
The week ahead will bring a fresh look at the U.S. housing sector, with reports on both new and existing home sales, as well as Thursday’s data on durable goods orders and initial jobless claims.
Tuesday’s report on Canadian retail sales will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, September 22
The U.S. is to release private sector data on existing home sales.
Tuesday, September 23
Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
Wednesday, September 24
The U.S. is to publish data on new home sales.
Thursday, September 25
The U.S. is to release reports on durable goods orders and initial jobless claims.
Friday, September 26
The U.S. is to round up the week with revised data on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health. The U.S. is also to release revised data on consumer sentiment.