TORONTO, June 12 (Reuters) - The commodity-linked Canadian dollar strengthened against its U.S. counterpart on Wednesday as cooler-than-expected U.S. inflation data bolstered prospects of Federal Reserve rate cuts and potentially the outlook for the global economy.
The loonie was trading 0.6% higher at 1.3681 per U.S. dollar, or 73.09 U.S. cents, with the currency rebounding after on Tuesday it touched its weakest intraday level in nearly two months at 1.3791.
"A broad U.S. dollar selloff is the driver of Canadian dollar strength today," said Adam Button, chief currency analyst at ForexLive. "The U.S. inflation numbers were surprisingly weak right across the board and that clears the way for the Federal Reserve to signal rate cuts this year."
Wall Street rallied and the U.S. dollar (.DXY), opens new tab tumbled against a basket of major currencies after U.S. consumer price data for May supported bets that the Federal Reserve may begin cutting interest rates as soon as September.
Fed officials later on Wednesday are expected to leave the central bank's benchmark overnight interest rate unchanged in the current 5.25%-5.50% range.
"The Canadian dollar is a pro-cyclical currency and rate cuts should kick off a round of global growth in time," Button said.
The price of oil , one of Canada's major exports, rose 1.2% to $78.83 a barrel, helped by the prospect of Fed rate cuts but also forecasts that global oil inventories would fall in the second half of 2024.
Also later on Wednesday, Bank of Canada Governor Tiff Macklem is due to participate in a panel discussion on economic volatility. The central bank will release Macklem's prepared remarks at 3:15 p.m. ET (1915 GMT).
Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The 2-year was down 12.5 basis points at 3.860%, its lowest level since Jan. 16.
Reporting by Fergal Smith; Editing by Alison Williams
