The USD/CAD currency pair continues to hold its strength, remaining above 1.4000. Traders are personally looking forward to some upcoming high-impact inflation data from Canada to potentially probe those vital support levels. Scheduled for release today at 1:30 PM London time, or 8:30 AM New York time, the Canadian Consumer Price Index (CPI) figures are anticipated to influence market dynamics significantly.
Economists and analysts are expecting a drop in Canada’s headline CPI. They predict it will continue to moderate to 2.1% yoy, from the elevated level of 2.4% in September. About a third of this decrease is due to falling energy prices helping to bring down overall inflation.
The Bank of Canada’s (BoC) fourth-quarter forecast is calling for a somewhat rosier headline CPI to 2.0%. Such a benevolent inflation environment would ramp up the market’s belief that the Fed really will be on hold at 2.25% for the next year. In addition, that very data might have cleared the way for other, larger rate increases over the next two years.
Core CPI, which is the average of trim and median CPI, is about to register its first year-on-year increase. Analysts are still looking for it to come in at 3%. This figure is especially dipped from September’s reading of 3.15%. The BoC’s forecast for core CPI is 2.9%, reflecting steady decline of inflationary pressures.
“USD/CAD is holding above key support at 1.4000. Canada’s October CPI print is up next (1:30 PM London, 8:30 AM New York). Headline CPI is seen easing to 2.1% y/y (BOC Q4 forecast: 2.0%) vs. 2.4% in September reflecting lower energy prices. Core CPI (average of trim and median CPI) is expected at 3% y/y (BOC Q4 forecast: 2.9%) vs. 3.15% in September.” – BBH FX analysts
The relentless stability of the USD/CAD above the key 1.4000 level is a testament to continued market confidence as traders wait for next week’s inflation data. Should the figures align with expectations, they may reinforce the current interest rate landscape and influence future monetary policy decisions by the Bank of Canada.