Canadian CPI, Inflation, USDCAD – Talking Points
- Canada CPI for April: 6.7% vs. 6.7% est. (prev. 6.7%)
- Canada Core CPI for April: 5.7% vs. 5.4% est. (prev. 5.5%)
- USD/CAD continues to lack direction around 1.2825
Canadian CPI data for April came in above expectations, showing that inflation continues to be stickier and more persistent than originally expected. Core inflation rose YoY by 5.7%, surpassing expectations of 5.4% and March’s print of 5.5%. The broader CPI index rose 6.8% YoY, which represents a fresh multi-decade high. The rise in inflation was fueled by rising grocery and housing expenses, with food costs soaring 9.7% from the same period last year.
Canadian Economic Calendar
Courtesy of the DailyFX Economic Calendar
Wednesday’s hot print will likely cement the Bank of Canada’s path toward tighter policy, as inflation remains well above the BoC’s 2% target. With the current expectation that the central bank will raise its benchmark interest rate by another 50 basis points on June 1st, traders may look to price in more hikes down the road. Deputy Gov. Toni Gravelle revealed in a speech that the current level of interest rates remains “too stimulative,” indicating that policymakers may look to hike extremely aggressively to restore price stability. If market participants have learned anything of late, it seems that G10 central banks appear to be on a warpath toward higher rates and neutral policy.
USDCAD 1 Hour Chart
Chart created with TradingView
Following the release of the data, USDCAD shot lower to test recent range lows around 1.2800, before bouncing shortly thereafter. For the last few sessions, USDCAD has been coiling around the 1.2825 area. Price has failed to break the recent range despite many potential catalysts, namely rising oil prices, Federal Reserve Chair Jerome Powell’s interview on Tuesday, or this set of inflation data points. Until either 1.2800 or 1.2860 breaks, we may be in store for prolonged chop.
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— Written by Brendan Fagan, Intern
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