USD/CAD to anchor below 1.28 on a drift higher in Canadian core inflation – TDS
15.12.2021, 08:03

USD/CAD to anchor below 1.28 on a drift higher in Canadian core inflation – TDS

Canadian CPI report is expected to show early signs of stabilization in November with inflation edging just 0.1pp higher to 4.8% YoY and prices up 0.3% MoM from October, in the view of analysts at TD Securities. As the analysts note, the loonie is CAD contained given CPI data will be released ahead of several key central bank decisions. But a drift higher in the core measures could anchor USD/CAD temporarily sub-1.28, 

Big upside surprise to get the market excited about a January rate hike from the BoC

“We look for CPI to rise by 0.3% MoM in November despite seasonal headwinds, pushing year-ago inflation higher by 0.1 p.p. to 4.8%. We look for material contributions from the shelter, transportation, and food components. We also see upside risk to the BoC's core inflation metrics.”

“This CPI release is likely to be overshadowed by the flurry of central bank decisions, including the Fed on the same day. That said, a stronger read on the core measures could help anchor USD/CAD below 1.28.”

“With the Fed likely to sound very hawkish later in the day, dips should be supported into 1.2750.”

“Beyond the event risks, we think CAD could fare better in the new year, especially if additional data point to a risk of a January BoC hike.”

 

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