Canadian Inflation Lifts Probabilities of an October Rate Hike

The USD/CAD fell 0.92 percent in the last five days. The currency pair is trading at 1.2921 after various phases of NAFTA jitters have helped and pressured the loonie. The Canadian currency gained on a weekly basis against a softening greenback.

US-China trade rhetoric hast lost some traction, and as JP Morgan CEO Jamie Dimon put it, it’s more like a skirmish than a war.


Canadian dollar weekly graph September 17, 2018

NAFTA optimism remains high, but officials from both sides have begun to trade sound bites as frustrations mount.

US White House Chief Economic Advisor Kevin Hasset said in a TV interview that the US could forge ahead with the Mexico only trade deal. The US has been trying to get Canada to join the quick agreement made with Mexico, but so far the negotiations have not been as smooth.

Canadian Foreign Minister wrapped up her Washington visit on Thursday with the Quebec elections on October 1 an important day if dairy concessions are given as part of the NAFTA renegotiation.

Canadian monthly GDP data will be released on Friday September 28, with a forecast of 0.1 percent. The stronger pace earlier in the year and with inflation above target will pressure the Bank of Canada (BoC) to lift rates in October. Probabilities of a 25 basis points hike are at 88.74 percent.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza