USD/CAD: Dips to be temporary as 1.27/28 offers appreciable support – TDS

FXStreet Insights Team FXStreet

Canadian CPI delivers another upside surprise in April. CAD was largely neutral following a stronger print on the underlying measures. As economists at TD Securities think nascent stability in risk is likely temporary, USD/CAD dips are expected to be short-lived.

Canadian inflation still running hot in April

“Headline CPI surprised to the upside again with a 0.6% MoM print, pushing inflation to a new high of 6.8% YoY. Strength was broad-based with a larger contribution from services (+0.9%), while core inflation surged to 4.2% YoY on average.

“The sharp increase to core inflation measures makes for a very strong report, although we do not see any major implications for the BoC's near-term outlook. Today's report is unlikely to tip the scales toward a 75bp hike, and we continue to look for 50bp moves in June/July.”

“USD/CAD might have some grace period here as we think the market is a bit exhausted from incessant selling of risk. But, a feeling persists that we may not be out of the woods yet and that still opens the risk that USD/CAD dips are temporary. 1.27/28 offer appreciable support for USD/CAD.”

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FXStreet Insights Team

FXStreet

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