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The Richard Ivey School of Business purchasing managers’ index came out at 58.6 points for the month of Septmber, significantly better than 53 points expected and 50.9 points last month.

USD/CAD reacted with a drop below 1.12, extending the falls seen earlier.

Among the report’s components, a big jump in the prices component shows that inflation is moving higher (71.6 points) and that the Bank of Canada may have to respond. Also employment looks good ahead of the jobs report on Friday: 53 points instead of 49.5 last month. The  component turned positive: from minor contraction to some growth.

The pair was already moving lower on weakness in the US dollar. The greenback  gave up some of its gains made after the excellent Non-Farm Payrolls on Friday.

Then, USD/CAD  jumped as high as 1.1270, just a few pips from the multi-year high seen earlier in the year. The falling prices of oil threatened  to push the Canadian dollar even lower, but  the aforementioned USD correction saved the loonie from making the big break.

For more, see the CAD forecast. Here is how this  turnaround looks on the chart:

Canadian dollar higher after strong Ivey PMI figure