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 April later during the early North American session this Tuesday, at 12:30 GMT. The headline CPI is expected to have risen by 0.4% during the reported month as compared to the 0.5% increase in March. The yearly rate, meanwhile, is expected to inch down from 4.3% to 4.1% in April - marking the lowest since August 2021. However, the Bank of Canada's (BoC) Core CPI, which excludes volatile food and energy prices, is estimated to edge up to 0.7% in April and decelerate to 3.9% on a yearly basis as compared to 0.6% and 4.3%, respectively, in March.

Analysts at NBF offer a brief preview of the crucial CPI report and write: “A rebound in gasoline prices could have been only partially offset by further moderation in the food segment and resulted in a 0.4% increase of the consumer price index in April (before seasonal adjustment). If we’re right, the 12-month rate of inflation should come down from 4.3% to a two-and-a-half-year low of 4.1%. The core measures preferred by the BoC should decrease as well; we see both the CPI-Trim (4.0% vs. 4.4%) and the CPI-Median (4.2% vs. 4.6%) declining four ticks on an annual basis.”

How Could It Affect USD/CAD?

Heading into the key release, the USD/CAD pair struggles to capitalize on its modest intraday uptick and seesawed between tepid gains/minor losses just above mid-1.3400s. Given that the Bank of Canada (BoC) has shown readiness to resume the rate-hiking cycle, if necessary to press inflation to the target, a surprisingly strong CPI print should provide a fresh boost to the domestic currency. This, in turn, will set the stage for an extension of the pair's previous day's retracement slide from the 1.3665-1.3670 region, or over a one-week high.

Conversely, softer Canadian consumer inflation figures could weigh on the Canadian Dollar, though the immediate market reaction is likely to be limited amid a modest US Dollar (USD) weakness. This might do little to provide any meaningful impetus to the USD/CAD pair. That government's borrowing limit, could infuse some volatility and produce short-term trading opportunities. said, the simultaneous release of the US monthly Retail Sales figures, along with developments surrounding a standoff to raise the federal

Key Notes

  •  Canadian CPI Preview: Forecasts from five major banks, inflation likely to ease again

  •  USD/CAD Forecast: Bulls look to seize back control ahead of Canadian CPI, US Retail Sales

  •  USD/CAD: Loonie to benefit if Canadian inflation were to surprise on the upper end – Commerzbank

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.