When is Canadian CPI report and how could it affect USD/CAD?

Canada CPI Overview

Wednesday's economic docket highlights the release of the Canadian consumer inflation figures for September, scheduled later during the early North American session at 12:30 GMT. The headline CPI is expected to ease to 0.1% during the reported month from the 0.2% rise recorded in August. Meanwhile, the yearly rate is anticipated to come in at 4.3% in September, up from 4.1% previous.

More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is forecast to remain well above the upper target. The gauge is expected to have increased by 0.3% MoM and 3.6% on yearly basis, up from 0.2% and 3.5%, respectively, in the previous month.

How Could it Affect USD/CAD?

A stronger than expected print may put additional pressure on the BoC to continue rolling back its pandemic-era stimulus. This should provide a modest lift to the Canadian dollar and exert additional pressure on the already weaker USD/CAD pair. The market reaction, however, is likely to be limited amid a modest pullback in crude oil prices, which should act as a headwind for the commodity-linked loonie.

Conversely, a softer reading might be enough to force investors to lighten their bearish bets around the major amid the emergence of some buying around the US dollar. This, in turn, suggests that the path of least resistance for the pair is to the downside and any meaningful slide back towards the 1.2300 neighbourhood could be seen as a buying opportunity.

Key Notes

  •   USD/CAD hangs near multi-month lows, around mid-1.2300s ahead of Canadian CPI

  •   USD/CAD Analysis: Bears await a sustained break below descending channel support

  •   USD/CAD: Target lowered from 1.2450 to 1.2200 – Credit Suisse

About Canadian CPI

The Consumer Price Index (CPI) released by the 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 purchase 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.