Hot Canadian inflation and US housing: USD/CAD

USD/CAD, H1

Canada’s CPI rose to a 4.8% pace in December from the 4.7% growth rate in November. CPI fell 0.1% after the 0.2% gain in November. The average of the BoC’s three core CPI measures was 2.9% in December, up from 2.8% in November. The important Trimmed CPI annualised reading rose to 3.7% from expectations of a “no change” reading at 3.4%. Prices rose in all eight major components on a year-over-year basis in December. Transportation and shelter prices contributed the most to the increase in the CPI. Year over year, prices for services (+3.4%) rose at a faster pace in December compared with November (+2.9%). Prices for goods (+6.8%) grew at a slightly slower pace than in November (+6.9%), moderating the price growth in the CPI. Gasoline prices rose to a lesser extent in December (+33.3%) than in November (+43.6%), contributing to the slowdown in goods prices.

US housing starts rose 1.4% to 1.702 mln in December, much better than expected, especially after jumping 8.1% to 1.678 mln in November and edging up 0.1% to 1.552 mln in October. Starts hit a 15-year high of 1.725 mln in March. All of the strength on the month was in the multifamily sector where starts increased 10.6% to 0.530 mln from the 0.2% rise to 0.479 mln. Single family starts declined -2.3% to 1.172 mln versus the 11.6% surge to 1.199 mln previously. Starts under construction increased 2.3% to 1.519 mln versus the 1.4% prior gain to 1.485 mln. But housing completions fell -8.7% to 1.295 mln after bouncing 13.0% to 1.418 mln in November. Permits climbed 9.1% to 1.873 mln following the 3.9% increase to 1.717 mln in November and a 15-year high of 1.883 mln last January.

The data spiked USDCAD down to test last week’s low around the 1.2450 zone and a new 10-week low. The rally in the Oil market has supported the CAD over the last 5 weeks when USDCAD touched 1.2960 and USOil was testing under $66.00 a barrel. Today USOil breached $87.00. 1.2500 remains the major psychological level representing both support in the higher time frames (200-day moving average) and resistance in the lower time frames (20-hour moving average).