The decidedly data dependent Bank of Canada has maintained that the current sluggish growth performance is a detour from the expansionary path that prevailed before a plunge in oil prices severely restrained Q4 GDP. Several important reports are due ahead of the April 24 policy announcement, with the releases having scope to influence expectations for a more dovish tone or even a rate cut further out on the horizon.

As we saw earlier today, Canada’s CPI and trade reports supported a steady BoC policy next week, with no shift anticipated in the cautiously optimistic outlook for growth. CPI jumped to a 1.9% y/y pace in March from 1.5% in February, as expected amid a run-up in gasoline prices. The surprise of the report was that core CPI measures mostly accelerated.


Meanwhile, the trade deficit narrowed by a bit more than expected to -C$2.9 bln in February from -C$3.1 bln in January, but exports fell 1.3% m/m while imports contracted 1.6% to leave a mixed takeaway on trade.

The pick-up in the annual growth rates of two of three core CPI measures to back or above 2.0% is the most significant development in terms of the BoC policy outlook, as it supports the BoC’s view that the slowing in the economy over Q4/Q1 is temporary, with underlying inflation seen returning to the 2% area from below as the delayed expansion resumes later this year.

More data is needed of course, but the March CPI report has eliminates the already very thin chance for a rate cut later this year. as it was close to expectations, and hence consistent with the Bank’s view that the economy will continue to recover from the oil price shock through the first half.

Resilience outside of the oil-producing regions does track the expectations that rates will eventually need to move higher again, likely in late 2020.

In the currency Market meanwhile, USDCAD fell following the warmer Canada CPI outcome, and the narrowed trade deficit. The pairing fell from 1.3330 to under 1.3270, printing a 1-month low in the process. Next risk event for the CAD comes at 12:30 GMT with the weekly EIA oil inventory report on tap.

However till then, the hourly chart looks extremely oversold, since the price moves outside the lower Bollinger Bands, below all 3 MAs with RSI at 30 and Stochastic looking to the downside again. The sharp move outside of BB could be followed by a correction to the upside within the day.

Next Support levels are set at : 1.3270 and 1.3250.

Next Resistance levels are set at :1.3310 and 1.3330.




Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Feed news

Latest Forex Analysis

Editors’ Picks

EUR/USD consolidates losses as Fed moderates message

EUR/USD is trading above 1.1350, consolidating losses. The Fed's Bullard and Chair Powell have conveyed a balanced message, boosting the greenback. Treasury Secretary Mnuchin said 90% of the deal with China is done.


GBP/USD trades below 1.2700

GBP/USD is trading below 1.2700. BOE Gov. Carney said the BOE may cut rates in case of a no-deal Brexit. Boris Johnson has rattled markets by saying leaving the EU by October 31st is "do or die."


USD/JPY sticks to gains near 107.70, looks to snap 7-day losing streak

Following the sharp upsurge witnessed during the European trading hours, the USD/JPY pair has gone into a consolidation phase and is now moving in a relatively tight range in the upper half of its daily trading range.


EIA: Crude inventories decreased by 12.8 million barrels, WTI inches closer to $60

In its weekly petroleum report for the week ending June 21, the Energy Information Administration (EIA) announced that the commercial crude oil inventories in the United States decreased by 12.8 million barrels from the previous week. 

Read more

Gold finds some support near $1400 mark, lacks follow-through

Gold held on to its weaker tone through the early North-American session, albeit pared a part of its intraday slide to the $1400 neighbourhood post-US economic data.

Gold News