No market moving surprises after hotter Canadian inflation – Commerzbank
17.05.2023, 07:11

No market moving surprises after hotter Canadian inflation – Commerzbank

Canadian inflation picked up in April. Loonie benefited initially. Nevertheless, economists at Commerzbank do not expect the CPI report to have a significant impact on the CAD.

Canadian inflation rate recorded surprise rise in April

“Yesterday’s inflation data for April is unlikely to be to the Bank of Canada’s (BoC) taste (core inflation, i.e. trim and median both at 4.2%, which means that they are in line with expectations). The overall rate on the other hand rose slightly to 4.3%. As we mentioned yesterday, the BoC expects an inflation rate of 3.3% on average in Q2.”

“Yesterday’s inflation data provided notable momentum for rate hike expectations on the market, which also benefitted the CAD at least temporarily. However, the OIS rate expectations signal that the market only prices in a 50% chance of a further 25 bps rate step in the summer (until July). That the market is only partially betting on a further rate hike is probably also due to the fact that the threshold for this step is likely to be reasonably high.”

“The BoC will publish its report on the Canadian financial system tomorrow and in it the bank will look at the risks for financial stability. The presentation will be accompanied by a press conference and is likely to be of interest to the market, but we do not expect any market-moving surprises.”

 

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