Canada releases inflation figures for September today. Headline CPI should have rebounded above 2.0%, but that won’t matter too much for the Bank of Canada as long as core measures (trim and median) remain anchored around 3.0%. Anyway, the Bank of Canada (BoC) has been firmly focused on growth and job risks associated with tariffs, and much less on inflation, ING's FX analyst Francesco Pesole notes.

USD/CAD to fall below 1.40 and to September levels before year-end

"Despite stronger-than-expected jobs data earlier in October, markets are pricing in 19bp of easing ahead of next week’s BoC meeting. The BoC’s Business Outlook Survey for the third quarter (published yesterday) offered more evidence of prolonged drag from US tariffs, plenty of uncertainty leading to slow investments and muted hiring intentions."

"The BoC echoes a lot of business concerns included in its survey when it cut rates when it cut rates in September. It would need to find a compelling story for signs of resilience or inflation concerns to stay on hold on 29 October."

"CAD remains our least favourite G10 currency. Higher chances of an October cut and little room for the BoC to signal the end of the cycle just yet can keep eroding CAD’s carry and maintain a risk premium on the loonie based on economic/tariff uncertainty. We still expect USD weakness to take USD/CAD back below 1.40 and to September levels before year-end, but in the crosses, we see little upside for the loonie."