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The Canadian dollar CADUSD Tuesday posted its biggest decline in nearly one year against its U.S. counterpart, as hotter-than-expected U.S. inflation data spooked investors who were hoping for an early start to Federal Reserve interest rate cuts.

The loonie was trading 1% lower at 1.3585 to the U.S. dollar, or 73.61 U.S. cents, its weakest intraday level since Dec. 13 and its biggest decline since last March.

“USD-CAD moved sharply higher today as part of a broader cross-asset response to stronger-than-expected U.S. inflation data, which caused the market to push out expectations for the first Fed rate cut,” said George Davis, chief technical strategist at RBC Capital Markets.

Wall Street’s main indexes fell to one-week lows and the U.S. dollar rallied against a basket of major currencies as U.S. consumer prices rose 0.3% in January from December amid a surge in the cost of shelter.

Canada’s economy could be particularly encumbered by a slow move to rate cuts after consumers borrowed heavily during the pandemic.

The Bank of Canada has said it’s premature to discuss easing rates from a 22-year high of 5% and that underlying inflation is still a concern. Canada’s inflation report for January is set for release next Tuesday.

The Canadian government will prioritize creating the economic conditions in its next budget to allow for interest rates to come down, Finance Minister Chrystia Freeland said.

The loonie lost ground despite higher prices for oil, one of Canada’s major exports. U.S. crude futures were up 1.4% at $78.01 a barrel on Tuesday.

Canadian government bond yields rose across the curve, tracking moves in U.S. Treasuries. The 10-year yield was up 7.2 basis points to 3.653%, after earlier touching its highest level since Nov. 27 at 3.695%.

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