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

Canada CPI Overview

Statistics Canada will release the latest consumer inflation figures for November later during the early North American session on Wednesday, at 13:30 GMT. The headline CPI is expected to decelerate sharply to 0.2% during the reported month from the 0.7% rise recorded in October. Meanwhile, the yearly rate is anticipated to hold steady and come in at 4.7% for November – the largest rise since February 2003.

More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is anticipated to fall from 0.6% in October to 0.1% during the reported month. The yearly rate, however, is expected to ease from 3.8% to 3.6% in November, still well above the central bank's upper target.

How Could it Affect USD/CAD?

Ahead of the key macro data, weaker crude oil prices undermined the commodity-linked loonie and pushed the USD/CAD pair to a nearly three-month high on Wednesday. A softer CPI print would be enough to weigh further on the Canadian dollar and allow the pair to capitalize on the ongoing positive momentum. Conversely, a stronger reading might prompt some long-unwinding around the major. That said, the immediate market reaction is more likely to be short-lived and overshadowed by the upcoming central bank event risk – the FOMC policy decision due later during the US session.

Hence, any subsequent move up might confront some resistance near the September monthly swing high, just ahead of the 1.2900 mark. That said, a sustained strength beyond should allow bulls to aim back to challenge the YTD top, around mid-1.2900s touched on August 20. On the flip side, the previous daily closing high level, around the 1.2840 region now seems to protect the immediate downside. Some follow-through selling could accelerate the corrective pullback towards the 1.2800 mark. Failure to defend the mentioned support levels might prompt aggressive long-unwinding trade and negate the prospects for any further gains.

Key Notes

  •   USD/CAD Outlook: Bulls have the upper hand ahead of Canadian CPI, US Retail Sales, FOMC

  •   USD/CAD seesaws around September's high amid soft oil prices, Canada CPI, Fed in focus

  •   Elliott Wave view: USD/CAD opens bullish extension

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.