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

Canada CPI Overview

Statistics Canada will release the latest consumer inflation figures for April later during the early North American session on Wednesday, at 13:30 GMT. The headline CPI is expected to rise 0.5% during the reported month against the 1.4% increase reported in March. The yearly rate is anticipated to hold steady at 6.7%in April, marking the fastest pace since January 1991. More importantly, the Bank of Canada's Core CPI, which excludes volatile food and energy prices, is estimated to rise 0.4% MoM in April and ease to 5.4% on yearly basis from the 5.5% previous.

How Could it Affect USD/CAD?

Ahead of the key release, the emergence of some US dollar dip-buying assisted the USD/CAD pair to stage a goodish intraday bounce from sub-1.2800 levels, or a two-week low touched earlier this Wednesday. A softer reading should allow spot prices to build on the intraday positive move, through an uptick in crude oil prices could underpin the commodity-linked loonie and cap the upside.

Conversely, a surprisingly stronger Canadian CPI print would lift bets for more rate increases by the Bank of Canada and boost the domestic currency. This, in turn, suggests that the path of least resistance for the USD/CAD pair is to the downside and the attempted recovery move runs the risk of fizzling out rather quickly.

From a technical perspective, any subsequent strength is likely to meet with a fresh supply near the 1.2900 mark. This, in turn, should keep a lid on any further gains near the 1.2930 resistance zone. That said, sustained strength beyond will suggest that the corrective pullback has run its course and shift the bias back in favour of bullish traders. The USD/CAD pair could then climb back to reclaim the 1.3000 psychological mark.

On the flip side, the 1.2800 round figure now seems to protect the immediate downside, below which the USD/CAD pair could slide to the 1.2765 region. Some follow-through selling should pave the way for additional losses and drag spot prices further towards the 1.2700 mark. The latter should act as a pivotal point and help determine the next leg of a directional move for the major.

Key Notes

  •   USD/CAD to fall back towards the low 1.27 zone on higher than expected Canadian CPI – Scotiabank

  •   USD/CAD Outlook: Bulls show some resilience below 1.2800 mark ahead of Canadian CPI

  •   USD/CAD recovers further from two-week low, climbs to mid-1.2800s ahead of Canadian CPI

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.