CAD CPI Drops

The latest set of Canadian inflation figures released today, will certainly make better reading for the BOC. Inflation was seen falling across the board last month with month-on-month CPI contracting 0.1%, down from the prior month’s 0.4% reading and below the 0.1% the market was looking for. Median CPI was seen falling to 3.8% from 4.1% prior, below the 4% the market was looking for, while trimmed CPI was seen falling to 3.7% against 3.9% prior and 3.8% expected. In all, the data shows that CPI is moving in the right direction again will be welcomed by the central bank.

Rate Hike Projections Fade

On the back of the data, market pricing for a BOC rate hike next week has fallen from around 50% to around 25%. The BOC had warned that it was open to further tightening though noted that rate decisions would be data dependent. With this in mind, traders now sense that the BOC likely has room to hold rates steady this month and wait for a further look at inflation next month. CAD is likely to stay a little lower subsequently though traders should be wary of any fresh uptick in oil prices which would fuel a further rally.

Technical Views

USDCAD

The rally in USDCAD above the 1.3685 level saw selling interest kick in to take price back below the level and back under the bearish trend line from YTD highs. While below here, the focus is on a fresh test of support at the 1.3501 level. While this area holds as support, however, the outlook remains bullish with 1.3839 the next upside level to note.