Canada inflation: Upside surprise - ING

Eren Sengezer FXStreet

"The holiday season didn't just bring presents to Canada - it brought upward price pressure to transportation and travel related components too," note ING analysts and add: "This was enough pressure to offset the decline in gasoline prices and bring headline inflaiton back to the Bank of Canada's 2% target - for now."

Key quotes

"The consumer price index in December rose 2.0% and 0.2% on an annual and monthly basis respectively. This was above consensus expectation (1.7% YoY) – though most of the surprise was due to one-off factors related to the holiday season, with volatile components such as travel tours (6.6% YoY) and air transportation (21.7% MoM). "

"The Bank of Canada’s (BoC) three main measures of core inflation sustained their 1.9% average. Although persistently weak wage growth is a downside risk to core inflation – it hasn’t yet made a material dent in consumer prices."

"Headline inflation is back at the BoC’s 2% target and core inflation has remained stable near this level too, but we don’t see this pushing the central bank to hike rates any earlier than July. The next hiking opportunity would probably be in April when a new monetary policy report is published, but we think a third quarter hike is more likely, as it allows the BoC to wait for confirmation that the Fed is still in hiking mode."

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

EUR/USD flat lines below 1.1900; divergent Fed-ECB expectations offer support

The EUR/USD pair struggles to capitalize on the overnight bounce from the 1.1835-1.1830 region and oscillates in a narrow band during the Asian session on Thursday. Spot prices currently trade around the 1.1875 area, remaining nearly unchanged for the day and staying within striking distance of an over one-week high, reached on Tuesday, amid mixed cues.

GBP/USD slips heading into the Thursday trading window

The Pound Sterling pulled back from four-year highs on Wednesday, weighed down by a combination of Bank of England dovishness and UK political uncertainty, even as the US Dollar weakened on soft labor market revisions.

Gold posts modest gains above $5,050 as US-Iran tensions persist despite strong labor data

Gold price trades in positive territory near $5,060 during the early Asian session on Thursday. The precious metal edges higher despite stronger-than-expected US employment data. The release of the US Consumer Price Index inflation report will take center stage later on Friday.

Bitcoin holds steady despite strong US labour market

Bitcoin briefly bounced from $66,000 to above $68,000 but slightly reversed those gains following Wednesday's US January jobs report. The top crypto is hovering around $67,000, down 2% over the past 24 hours as of writing on Wednesday.

The market trades the path not the past

The payroll number did not just beat. It reset the tone. 130,000 vs. 65,000 expected, with a 35,000 whisper. 79 of 80 economists leaning the wrong way. Unemployment and underemployment are edging lower. For all the statistical fog around birth-death adjustments and seasonal quirks, the core message was unmistakable. The labour market is not cracking.

XRP sell-off deepens amid weak retail interest, risk-off sentiment

Ripple (XRP) is edging lower around $1.36 at the time of writing on Wednesday, weighed down by low retail interest and macroeconomic uncertainty, which is accelerating risk-off sentiment.