CAD Inflation Key for the Bank of Canada
In its last rate meeting, the Bank of Canada highlighted its confidence that inflation was falling. However, it did see that core inflation was stickier globally and that the service sector was showing persistent price pressures. See here for details on its last meeting.
CAD reaction to Canadian inflation data from April 18
On April 18, Canadian inflation data was printed with a mixed picture. The core y/y reading was lower than the 4.4% expected at 4.3%, but the m/m reading was higher at 0.6% vs the 0.4% expected. The median fell to 4.6% from 4.8% y/y and the trimmed mean was reassuringly lower too at 4.4% vs 4.8% expected. See the data release here from the Financial Source economic data tracker.
The reaction to this was that the CAD weakened out of the print sending the USDCAD higher.
So, for the CAD inflation data on Tuesday, May 14, look for a different outcome to surprise markets. Interest rate markets are pricing in a 94% chance that the BoC will keep rates on hold on June 07. They also see the BoC cutting interest rates once this year. So, this means that a surprise will be higher inflation data than the market is expecting. If inflation comes in above economists’ maximum expectations then watch for a possible CAD downside. Should the CAD have reasons for strength it will likely gain most against any weaker currencies on the day.
About: HYCM is the global brand name of HYCM Capital Markets (UK) Limited, HYCM (Europe) Ltd, HYCM Capital Markets (DIFC) Ltd and HYCM Limited, all individual entities under HYCM Capital Markets Group, a global corporation operating in Asia, Europe, and the Middle East.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.