Canadian Dollar At Crossroads Ahead of Inflation Data

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Image via Bank of Canada

In the past few weeks, the Canadian Dollar was one of the top performing currencies against the US Dollar. Despite the fact that Crude Oil has been declining, the Canadian Dollar managed to post the highest level against the US Dollar since March of this year, while Crude Prices are at the lowest level since August of last year.

Bank of Canada Policy Change

Month after month, there are signs of a robust recovery in Canada, which led the Bank of Canada chairman Poloz to hint for a policy change.

He noted that they believe that there is no need for additional stimulus measures, despite the fact that the Core inflation has slipped to the lowest level since 2013 at 1.1%, posting the second monthly slowing down in a row.

This also comes on the back of the continuous decline in the unemployment rate which dipped this year to the lowest level since the financial crisis.

Moreover, the MoM GDP has been growing notably, other the past 10 months, eight months showed a growth rate, while only two months showed a slight slowing down.

Yet, Canada is still facing some challenges, especially in the housing sector, which seems to be overheated and started to slow down significantly over the past few months, especially that some of its biggest national lenders have filed for emergency funds.

Today’s Inflation Data Ahead

Today, all eyes will be headed toward Canada’s inflation figures that are set to have a notable impact on the markets.

So far, polls have only estimates for the MoM CPI, which stands at 0.2% in May compared to 0.4% in April of this year.

The rest of the data including Core CPI, Common CPI, Median CPI and the Trimmed CPI has no estimates until this report is released.







Core CPI MoM


Common CPI YoY


Median CPI YoY


Trimmed CPI YoY


Despite the fact that there are no estimates for the data above, Canada’s YoY inflation remained stable around the highest level since 2014 near 1.6%, with a stabilization around the same level since more than a year now.

Today’s data is likely to come up with another tick higher, as this is also the case around the world. If so, this would confirm the Central Bank’s fear for a possible overshooting inflation in the future. In return, no more stimulus is needed anytime soon. In fact, a rate hike would be a more logical step.

USDCAD At Cross Road

USDCAD has been trending slightly higher since April of last year, when it bottomed out around 1.25 and kept rising all the way to this year’s high around 1.3780’s.

Since this year’s top, the pair has been declining gradually, all the way back to 1.32 areas until this report is released.

The recent decline has led to a notable technical change, as the pair is now trading below its entire moving averages, including the 50, 100 and the 200 DAY MA’s for the first time since February of this year.

At the same time, looking at the daily chart, USDCAD is now testing its daily trend line support, which lasted from April of last year. It has been hovering around the same area for the past eight trading days.

This shows that this area is a focal point for the upcoming move. In the meantime, stronger inflation today might be the needed catalyst for a break lower, which may continue toward 1.3150’s and even 1.30 later next month.

Otherwise, a surprising decline in inflation might lead to another spike higher. Yet, this is likely to be limited below the previous top around 1.35 before the downward trend resumes.



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