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

Canada CPI Overview

Statistics Canada will release the consumer inflation figures for October later during the early North American session on Wednesday, at 13:30 GMT. The headline CPI is expected to rise 0.7% during the reported month as compared to a modest 0.1% uptick in September. The yearly rate, however, is expected to hold steady at 6.9% in October. More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is estimated to rise by 0.7% MoM in October and come in at 6.3% on a yearly basis, up from 6% in September.

Analysts at TD Securities offer a brief preview of the key macro data and write: “We look for headline CPI to edge higher to 7.0% in October as energy prices help drive a 0.8% MoM increase. Gasoline will provide the main catalyst for the increase, while mortgage interest and rents provide another source of strength as seasonal factors will weigh on groceries. Core inflation should also tick higher in October, with CPI trim/median rising by 0.1pp.”

How Could it Affect USDCAD?

Ahead of the release, the USDCAD drops back to a two-month low and challenges the 100-day SMA support near the 1.3225 region amid the emergence of fresh US Dollar selling. That said, subdued action around crude oil prices fails to provide any meaningful impetus to the commodity-linked Loonie and helps limit the downside for the major.

Furthermore, a softer-than-expected Canadian CPI print will be enough to prompt some near-term short-covering and allow spot prices to reclaim the 1.3300 mark. Conversely, stronger domestic data could provide a fresh boost to the Canadian Dollar and pave the way for a further near-term depreciating move for the USDCAD pair.

Apart from this, the simultaneous release of the US monthly Retail Sales data should infuse additional volatility and produce some meaningful trading opportunities.

Key Notes

  •   Canadian CPI Preview: Forecasts from four major banks, a detour from the path towards slower inflation

  •   USDCAD Forecast: 100 DMA holds the key for bulls ahead of US Retail Sales, Canadian CPI

  •   USDCAD to drop temporarily if Canadian inflation surprise on the upside – Commerzbank

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.