Canada's April consumer price index (CPI) year-on-year growth slowed to 1.7%, the lowest since September of last year, according to data released by Statistics Canada on Tuesday (20th). This is down from 2.3% in March but slightly higher than the expected 1.6%. However, the core inflation indicators rose to a 13-month high, adding uncertainty to the Bank of Canada's (BoC) potential interest rate cut in June.

The core inflation measures—median CPI and trimmed CPI—rose to 3.2% and 3.1% respectively. The decline in inflation is largely attributed to plunging energy prices, with oil prices down 18.1% year-on-year, and natural gas prices falling 14.1%. While overall inflation cooled, travel-related prices increased by 6.7%, and food prices rose to 3.8% from 3.2% in March.

Following the data release, market expectations for a rate cut on June 4 have significantly decreased, with overnight swaps indicating the likelihood of a cut dropped from nearly 70% to under 40%, leading to a rebound in the Canadian dollar against the U.S. dollar.