The Canadian dollar weakened to kick off the trading week after positive inflation data removed an interest rate hike from the Bank of Canada’s table next month. The loonie has weakened in recent sessions, driven primarily by a stronger US dollar.

In August, Statistics Canada reported that the annual inflation rate was unchanged at 3%. On a monthly basis, the consumer price index fell 0.1%, coming in below the consensus estimate of 0%.

Like other advanced economies, inflation was driven primarily by elevated energy costs, as gasoline prices surged almost 23%. Grocery prices also jumped 2.8%, down from 3.1% the previous month, the first slowdown in two years.

Core inflation, which strips out volatile energy and food prices, ticked up to 2.4%, slightly above economists’ expectations. From July to August, core inflation edged up at a smaller-than-expected pace of 0.1%.

Overall, the economic data likely removed a possible interest rate hike from the table at the Bank of Canada’s October policy meeting.

But economists still believe a new tightening cycle could be on the horizon amid upside inflation risks and stronger economic growth.

At the same time, investors are increasingly betting that the Federal Reserve will raise interest rates this week in response to firm August CPI data.

JPMorgan Chase, however, says the rate hike will likely occur because financial markets have forced the central bank’s hand rather than underlying inflation pressures.

“We now expect a 25bp hike next week, but largely because the market has forced the Fed’s hand – not because the fundamental inflation story has deteriorated materially. If next week ends up looking more like one-and-done than the start of a new hiking cycle, stocks should be able to digest it just fine,” the bank’s economists aid.

Still, the USD/CAD currency pair surged 0.4% to 1.3922, from an opening of 1.3871, at 13:08 GMT on Monday. The EUR/CAD slipped 0.25% to 1.6052, from an opening of 1.6088.