Canadian dollar flat ahead of CPI

The Canadian dollar is drifting ahead of the North American session. Currently, USD/CAD is trading at 1.2559, unchanged on the day.

Canada will release October inflation reports later in the day. As is the case in the US, inflation is accelerating and has become a headache for the Bank of Canada. In September, headline inflation hit 4.4% y/y, its highest level since 2003. The BoC has signalled that it may raise rates around mid-2022, but the markets have priced in a hike for March of next year. If the CPI release beats expectations, the BoC will be under pressure to bring forward its timeline for a hike, which would be bullish for the Canadian dollar.

In the US, inflation has hit its highest level in 30 years, and pressure is mounting on the Fed to take action in order to contain inflation. The Fed’s message that inflation is transient has grown more stale with every CPI report. Inflation may finally start to ease next year, but that seems a long, long time away for consumers who are feeling the pinch of across-the-board price increases.

The Fed announced earlier this month that it would taper its bond program, but the chorus of voices calling on the Fed to accelerate tapering is getting longer. We’ll be hearing from Fed members throughout the week, and the markets will be listening closely, looking for some insights as to what the Fed may be planning next.

Ahead of the December policy meeting, the Fed will have had a chance to review key inflation data, including the October PCE index, the Fed’s favorite inflation gauge, as well as the November CPI report. These releases could have a significant impact on what if any moves the Fed announces at the December meeting.

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 USD/CAD Technical

  • There is support at 1.2423. Below, there is support at 1.2296
  • There is resistance at 1.2641, followed by 1.2732

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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