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

Canada CPI Overview

Statistics Canada is scheduled to release the consumer inflation figures for March later during the early North American session this Wednesday, at 12:30 GMT. The headline CPI is expected to have risen by 0.5% during the reported month as compared to the 0.4% increase in February. The yearly rate, however, is expected to decelerate further from 5.2% to 4.3% in March. More importantly, the Bank of Canada's (BoC) Core CPI, which excludes volatile food and energy prices, is estimated to rise by 0.4% in March and ease to 4.2% on a yearly basis as compared to 0.5% MoM and 4.7% YoY, respectively, in February.

How Could It Affect USD/CAD?

Heading into the key release, the USD/CAD pair attracts fresh sellers on Tuesday and stalls a two-day recovery trend from the 1.3300 mark, or a two-month low touched last week. Given that the Bank of Canada (BoC) remains ready to raise borrowing costs again, if needed, to restore price stability, stronger inflation figures should provide additional lift to the domestic currency and exert additional downward pressure on the major.

Conversely, a softer Canadian CPI print is more likely to be overshadowed by the emergence of fresh selling around the US Dollar (USD) and might do little to provide any respite to the USD/CAD pair. This, in turn, suggests that the path of least resistance for spot prices is to the downside and any attempted bounce might still be seen as a selling opportunity, rather runs the risk of fizzling out quickly.

Key Notes

  •   USD/CAD Analysis: Struggles to find acceptance above 200 DMA, focus shifts to Canadian CPI

  •   USD/CAD Price Analysis: Retreats towards 1.3300 with eyes on Canada inflation, BoC’s Macklem

  •   Week Ahead: Canada Macro Market Movers – TDS

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.