Strong Canada Consumer Price Index (CPI) To Derail USD/CAD Rebound

Another uptick in Canada’s Consumer Price Index (CPI) may derail the recent rebound in USD/CAD as it puts pressure on the Bank of Canada (BoC) to implement higher borrowing-costs sooner rather than later.

Recent comments from the BoC suggests the central bank remains in no rush to raise the benchmark interest rate as officials argue ‘some monetary policy accommodation will still be needed to keep inflation on target,’ but signs of heightening price pressures may push Governor Stephen Poloz and Co. to alter the outlook for monetary policy as ‘Some progress has been made on the key issues being watched closely by Governing Council, particularly the dynamics of inflation and wage growth.’

As a result, updates to the CPI may trigger a bullish reaction in the Canadian dollar should the report boost bets for another BoC rate-hike in 2018. At the same time, a below-forecast inflation report may ultimately fuel the recent rebound in USD/CAD as it dampens bets for higher interest rates in Canada.

IMPACT THAT CANADA CPI HAS HAD ON USD/CAD DURING THE PREVIOUS RELEASE

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR

2018

03/23/2018 12:30:00 GMT

1.9%

2.2%

-73

-14

March 2018 Canada Consumer Price Index (CPI)

USD/CAD 5-Minute Chart

The headline reading for Canada inflation picked up more-than-expected in February, with the Consumer Price Index (CPI) climbing to an annualized 2.2% from 1.7% the month prior to mark the fastest pace of growth since 2014. A deeper look at the report showed nine of the eleven components highlighting stronger inflation, with prices for clothing/footwear marking the first rise in four months, while energy prices narrowed 0.3% during the same period.