Canadian CPI Overview
Wednesday's Canadian economic docket features the key release of consumer inflation figures for August, scheduled to be published at 12:30 GMT. The headline CPI is anticipated to have edged lower by 0.1% during the reported month, while the yearly is seen holding steady at 2.0%. Meanwhile, the BoC's core CPI is expected to rise by 0.1% on a monthly basis and to 2.2% yearly rate as compared to the previous month's reading of 2.0%.
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 important releases, the USD/CAD pair was seen trading with goodish intraday gains just above mid-1.3200s, closer to near two-week tops set in the previous session. A softer reading will be enough to provide the required momentum that should assist the pair to move back above the very important 200-day SMA barrier near the 1.3300-1.3305 region and aim towards testing monthly swing high - around the 1.3380-85 region.
Alternatively, a stronger reading might prompt some long-unwinding trade and accelerate the slide back towards the 1.3225-20 intermediate support en-route the 1.3200 round figure mark, albeit any subsequent slide is likely to be limited ahead of Wednesday's key event risk - the highly anticipated FOMC monetary policy decision - scheduled to be announced later during the US trading session.
Key Notes
Canada: Headline inflation likely to slip – TD Securities
USD/CAD climbs back above mid-1.3200s, focus shifts to Canadian CPI/FOMC
USD/CAD technical analysis: 1.3230/35 support-area restricts immediate declines
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.
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