The Canadian dollar weakened to 1.39 per US dollar from a three-month high of 1.376 reached on August 21, as Fed Chair Warsh signaled a more restrictive policy stance and supported the US dollar. Warsh said the Federal Reserve is monitoring the PCE index (a measure of consumer inflation), using firmer language than earlier suggestions that a newly created task force could change the central bank’s preferred inflation measure. Rate futures moved to reflect a possible Federal Reserve rate hike next month, while the Bank of Canada (Canada’s central bank) is widely expected to leave rates unchanged at its September 2 meeting. A Federal Reserve hike with a Bank of Canada hold would widen the US-Canada interest-rate differential, increasing the appeal of US assets and adding pressure to the Canadian dollar. Canada’s economy grew at its strongest pace in nearly two years, helped by a rebound in auto production, although President Trump’s threat to raise tariffs on Canadian cars, trucks and auto parts to 50% from January 1, 2027, remained a headwind.