When is Canadian CPI report and how could it affect USD/CAD?

Haresh Menghani FXStreet

Canadian CPI Overview

Wednesday's Canadian economic docket features the key release of consumer inflation figures for June, scheduled to be published at 12:30 GMT. The headline CPI is anticipated to have fallen by 0.2% month-on-month (m-o-m), with the yearly falling to 2.0% from 2.4% previous. Meanwhile, the BoC's core CPI is expected to have edged higher by 0.1% m-o-m and rise to 2.6% yearly rate during the reported month.

As Petr Krpata, chief EMEA FX and IR strategist at ING writes - “According to a Bloomberg survey, headline CPI should decelerate, although all core measures (preferred by the Bank of Canada) should stay above the 2% target range mid-point. This should allow the BoC to stick to a neutral stance, keeping any USD/CAD rebound broadly limited. Today, we expect the pair to stay range-bound and consolidate below 1.3050.”

Deviation impact on USD/CAD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction on the pair is likely to be around 43-pips during the first 15-minutes and could get extended to 66-pips in the following 4-hours in case of a relative deviation of -0.86. Alternatively, the reaction to a higher than expected reading, with a relative deviation of +0.68 or higher could be around 61-pips in the first 15-minutes and 75-pips in the following 4-hours.

How could it affect USD/CAD?

Ahead of the key release, the USD/CAD pair was seen trading with modest losses just above mid-1.3000s and surprisingly stronger reading might trigger the resumption of the pair’s well-established bearish trend. The downfall could drag the pair back towards challenging the key 1.30 psychological mark, below which the downfall could further get extended towards 1.2970-65 intermediate support en-route the 1.2930 region.

Alternatively, softer readings might prompt some short-covering move, which should assist the pair to surpass the 1.3100 handle and aim towards weekly swing highs resistance near the 1.3145-50 region. A follow-through buying would suggest that the pair might have bottomed out in the near-term and pave the way for a further recovery towards the 1.3200 handle en-route the 200-day EMA – around mid-1.3200s.

Key Notes

• Canada: Headline inflation to decelerate to 2.1% y/y in June - TDS

• Canadian CPI: Focus be to what extent May’s surge is reversed - Wells Fargo

• USD/CAD slides back closer to mid-1.3000s, focus shifts to Canadian CPI

About BoC's Core CPI

Consumer Price Index Core is released by the Bank of Canada. “Core” CPI excludes fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products. These volatile core 8 are considered as the key indicator for inflation in Canada. Generally speaking, a high reading anticipates a hawkish attitude by the BoC, and that is said to be positive (or bullish) for the CAD.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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