USD/CAD: Loonie may not fall out of markets’ favours just yet as BoC will go for another hike in July – ING

FXStreet Insights Team FXStreet

Today’s inflation data in Canada will be key to driving market expectations for the BoC’s July decision. Economists at ING analyze CAD outlook.

Inflation numbers in focus

Consensus is looking for a rather substantial slowdown in headline inflation from 4.4% to 3.4%, while the core measure should decelerate to around 4.0%. We are still inclined to think that the BoC will go for another hike in July, and it may take a sub-consensus read in underlying inflation today to convince them not to.

Either way, with the Fed still threatening to tighten more, it seems hard to fully price out BoC tightening down the road, and CAD – which has the best volatility-adjusted carry in G10 – may not fall out of markets’ favours just yet.

We still target sub-1.30 levels in the third quarter.

See – Canada CPI Preview: Forecasts from six major banks, inflation expected to decelerate sharply in May

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.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.