The Canadian dollar started the week with gains, but has reversed directions on Wednesday. USD/CAD is trading at 1.2978, up 0.47% on the day.

CPI expected to hit 7.4%

Canada releases the May inflation report later today, and the markets are bracing for another rise. CPI is expected to rise to 7.4%, which would be a sharp rise from the 6.8% gain in April, a 30-year high. In a sign of the times, today’s inflation report will include used car prices for the first time and give more weight to gasoline prices.

With no sign of the long-sought-after inflation peak, the Bank of Canada is under strong pressure to ratchet up its rate hikes. The BoC holds its next meeting on July 13th, and a CPI reading above 6.8% would virtually cement a massive 0.75% rate hike. The markets have priced in a 0.75% at about 80%. RBC and CIBC also expect the central bank to deliver a 0.75% increase.

The BoC has warned that it expects inflation to move higher in the near term and has signalled that it will raise rates towards the upper end of the 2%-3% neutral range. With the benchmark rate currently at 1.5%, that means that we can expect significant tightening in the second half of the year. The BoC is also looking to remain in sync with the Federal Reserve, which delivered a super-size 0.75% hike just last week.

There are no US releases on Wednesday, but there will be plenty of interest in what Fed Chair Powell has to say on Capitol Hill. The markets will be looking for clues on the direction of monetary policy. Last week, Powell said that further 0.75% hikes were unlikely, and a repeat of this stance could dampen sentiment towards the US dollar. At the same time, if Powell’s forecast for the US economy is on the pessimistic side, risk appetite could fall and send the greenback higher.

USD/CAD technical

  • USD/CAD faces resistance at 1.2894. Above, there is resistance at the round number of 1.3000.

  • There is support at 1.2706 and 1.2600.

USDJPY

 

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 OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD recovers above 1.0450 as USD slips ahead of US inflation

EUR/USD recovers above 1.0450 as USD slips ahead of US inflation

EUR/USD is trading above 1.0450, displaying a modest rebound on a minor pullback in the US dollar. The US Treasury yields rebound amid cautious optimism, ahead of PCE inflation. The US Core PCE Price Index is seen easing to 4.7% YoY in May. 

EUR/USD News

GBP/USD advances towards 1.2150 amid USD retreat, US data eyed

GBP/USD advances towards 1.2150 amid USD retreat, US data eyed

GBP/USD is advancing towards 1.2150 amid a broad US dollar retreat, despite a mixed market mood. BOE's Bailey said the UK economy is facing a very large real income shock. UK data and US PCE inflation awaited. 

GBP/USD News

Gold seems vulnerable near two-week low, eyes US PCE inflation data

Gold seems vulnerable near two-week low, eyes US PCE inflation data

Gold traded with a mild negative bias for the fourth successive day on Thursday and languished near a two-week low touched the previous day. The XAUUSD was last seen hovering around the $1,816 region and was pressured by the prospects for more aggressive rate hikes by the Fed.

Gold News

Breaking: Bitcoin price drops below $19,000

Breaking: Bitcoin price drops below $19,000

Bitcoin price has breached a critical area of support over the past few hours, dipping below $19,000. Transaction history shows that a large number of addresses acquired BTC above $20,000. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures