Canadian Dollar: Data and tariffs shape near-term risks – TD Securities

FXStreet Insights Team FXStreet

TD Securities’ Robert Both and Emma Lawrence highlight that markets are watching Canadian CPI and potential US Section 338 tariffs on CAD exports. They expect headline CPI at 2.9% year-on-year in July with core at 1.85%, and see retail sales flat in June. The Bank of Canada is projected to hold its Overnight Rate at 2.25% through 2026 before gradual hikes in 2027.

CPI, tariffs and BoC expectations

"The market's focus will be divided between top-tier economic data and Wednesday's deadline for Section 338 tariffs. Canadian officials have spent the last three weeks negotiating with their US counterparts to find an off-ramp before the 50% tariff on $20bn (USD) of CAD exports comes into effect."

"We look for headline CPI to firm by 0.1pp to 2.9% y/y in July as prices rise by 0.4% m/m on positive contributions from food and energy products. Seasonal tailwinds to travel related components will provide another boost, although travel services should still see a modest pullback after the sharp acceleration into the World Cup."

"CPI-trim/median are forecast to hold stable at 1.85% y/y or 1.6% on a 3m annualized basis, which would leave core CPI tracking slightly below BoC projections from the July MPR and allow the Bank to stick to its recent messaging at the next policy decision on September 2nd."

"We look for the Bank of Canada to stay on hold at 2.25% through 2026 before a return to neutral (2.75%) next year, with 25bp hikes in January and March 2027."

"We look for retail sales to hold unchanged in June for a softer performance than implied by flash estimates for a 0.4% increase. Stronger motor vehicle sales will provide a tailwind to the headline print, leaving the ex-autos measure down 0.2% m/m, with softer gasoline prices exerting a heavy drag."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD hits fresh three-month highs above 1.3550

GBP/USD stretches north and refreshes three-month highs above 1.3500 in the European session on Monday. The prevalent US Dollar selling bias favors bullish traders and suggests that the path of least resistance for the pair remains to the upside.

EUR/USD extends gains above 1.1600 on USD weakness

EUR/USD extends its advance above 1.1600 in European trading hours on Monday. The US Dollar resumes its downside amid weaker-than-expected US economic data, shifting Fed expectations and fading geopolitical risk premium.

Gold looks to build strength above $4,400 amid fading Fed hike bets

Gold builds on Friday's bounce from the $4,300 neighborhood and attracts some follow-through buyers at the start of a new week. The commodity is now looking to extend momentum above the $4,400 mark, though it remains below the highest level since June 5, touched last Thursday, amid mixed fundamental cues.

Pepe defends a key support amid mixed retail demand

Pepe is up nearly 2% after a 10% decline last week, showing signs of a mild recovery, while broader crypto market risk appetite remains weak. PEPE derivatives data point to a mixed outlook, as Open Interest declines while funding rates turn positive. Technically, PEPE must hold above its $0.00000255 support floor to avoid a downside of over 10%.

Why the Fed replaced the Treasury buyers who left

When Japan moved to defend the Yen, the arrangement that drew the attention was the Federal Reserve's repo facility for foreign monetary authorities, which lets an approved foreign central bank raise dollars by temporarily handing Treasuries to the Fed rather than selling them into the market. The logic was elegant. Japan gets dollars, the Treasury market avoids a forced seller, and American long rates are spared. Coverage treated it as the mechanism that made the intervention work.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.