USD/CAD – Loonie takes flight after inflation data

  • Canada MAY CPI M/M: +0.4% vs. +0.1%e; Y/Y: +2.4% vs. +2.1%e
  • CPI Core- Median Y/Y: +2.1% vs. +1.9%e
  • CPI Core- Common Y/Y: +1.8% vs. +1.9%e
  • CPI Core- Trim Y/Y: +2.3% vs. +2.1%e (highest since Feb. 2012)
  • Consumer Price Index: 136.6 v 136.2e
  • Data from Stats Canada showed Canada’s annual inflation rate climbed in May, driven by steep price increases for fresh vegetables and autos.

    Canada’s consumer-price index increased +2.4% on a year-over-year basis in May, an increase from a +2% rise in the previous month.

    Market expectations were for a +2.2% rise in May and on a month-over-month basis, inflation rose +0.4%.

    Loonie takes flight after inflation data

    CAD is trading at the intraday highs after this morning’s inflation print – C$1.3345 up +0.24% from C$1.3381 just ahead of the release.

    What’s the BoC to do?

    The strong inflation report is unlikely to influence Bank of Canada (BoC) to change course any time soon. Governor Poloz and his fellow policy makers, to date, have put on hold any further rate rises, due largely to risks in the global trading environment and lacklustre business investment.

    Nevertheless, last month’s inflation report, coupled with continued strong domestic jobs growth and a recent recovery in housing, should quieten most the rate cut ‘doves’ out there.

    Note: The BoC kept its main interest rate unchanged in May at +1.75%, and in its decision said it “expected headline inflation to remain around +2% in the coming months.”

    This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell