When is the Canadian consumer inflation (CPI report) and how could it affect USD/CAD?

Canada CPI Overview

Statistics Canada will release the latest consumer inflation figures for May later during the early North American session on Wednesday, at 12:30 GMT. The headline CPI is expected to rise 1.0% during the reported month against the 0.6% increase reported in April. The yearly rate is also anticipated to accelerate to its highest in nearly 40 years, to 7.4% in May from 6.8% previous. More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is estimated to rise 0.3% MoM in May and to 5.9% on yearly basis from the 5.7% in April.

How Could it Affect USD/CAD?

A stronger inflation report would fuel speculations that the Bank of Canada will match the Fed's recent 75bps rate hike move when it next meets on July 13. This would be the biggest hike in 24 years and lend some support to the domestic currency. That said, a slump in crude oil prices could act as a headwind for the commodity-linked loonie.

Conversely, a softer print - though seems unlikely - would be enough to trigger some short-covering around the USD/CAD pair. That said, any immediate reaction is likely to remain limited ahead of the key event risk - Fed Chair Jerome Powell's semi-annual testimony before the Senate Banking Committee. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the pair is to the upside.

Key Notes

  •   USD/CAD Analysis: Bulls looking to seize back control, Canadian CPI/Powell’s testimony eyed

  •   USD/CAD: Break above 1.31 to open up additional gains towards 1.3334 – Credit Suisse

  •   USD/CAD Price Analysis: Advances towards 1.3000 on symmetrical triangle breakout

About Canadian CPI

The Consumer Price Index (CPI) released by Statistics Canada is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of CAD is dragged down by inflation. The Bank of Canada aims at an inflation range (1%-3%). Generally speaking, a high reading is seen as anticipatory of a rate hike and is positive (or bullish) for the CAD.