Breaking: Canadian Core CPI ticked higher in June


Inflation in Canada, as measured by the change in the Consumer Price Index (CPI), declined to 2.7% on a yearly basis in June from 2.9% in the previous month, Statistics Canada reported on Tuesday. This reading came below market expectations.

On a monthly basis, the core CPI, which excludes volatile food and energy prices, contracted by 0.1%, as well as the headline CPI. Meanwhile, the Bank of Canada's Core Consumer Price Index increased by 1.9% from a year earlier, up from the 1.8% growth recorded in May.

Market reaction

USD/CAD advances to multi-day highs and flirts with the 1.3700 barrier in the wake of the release amidst the broad-based recovery in the US Dollar.

Canadian Dollar PRICE Today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Australian Dollar.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   0.09% 0.11% 0.40% 0.12% 0.54% 0.38% 0.14%
EUR -0.09%   0.02% 0.35% 0.05% 0.43% 0.30% 0.05%
GBP -0.11% -0.02%   0.31% 0.02% 0.42% 0.28% 0.05%
JPY -0.40% -0.35% -0.31%   -0.30% 0.15% -0.02% -0.22%
CAD -0.12% -0.05% -0.02% 0.30%   0.42% 0.26% 0.04%
AUD -0.54% -0.43% -0.42% -0.15% -0.42%   -0.16% -0.40%
NZD -0.38% -0.30% -0.28% 0.02% -0.26% 0.16%   -0.23%
CHF -0.14% -0.05% -0.05% 0.22% -0.04% 0.40% 0.23%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

 


This section below was published as a preview of the Canadian Consumer Price Index at 8:00 GMT on July 16.

  • The Canadian Consumer Price Index is expected to lose some traction in June.
  • The BoC reiterated that inflation is heading towards the target.
  • The Canadian Dollar remains stuck within the 1.3600–1.3800 range vs. the US Dollar.

Canada is set to reveal the latest inflation data on Tuesday, with Statistics Canada publishing the Consumer Price Index (CPI) for June. Forecasts predict disinflationary pressures to resume in both the headline CPI and the Core CPI following May’s hiccup.

In addition to the CPI data, the Bank of Canada (BoC) will release its core Consumer Price Index, which excludes volatile components such as food and energy. As witnessed, the BoC core CPI showed a 0.6% monthly increase and a 1.8% year-on-year rise in May, while the headline print rose by 2.9% over the last twelve months and 0.6% from the previous month.

These figures are closely monitored as they could influence the Canadian Dollar (CAD) in the short term and affect perceptions of the Bank of Canada's monetary policy, particularly after the central bank reduced its policy rate by 25 bps to 4.75% in June.

Looking at the FX world, the Canadian Dollar keeps navigating the 1.3600-1.3800 range vs. its American counterpart, while the floor of this range still appears propped up by the key 200-day SMA (1.3596).

What can we expect from Canada’s inflation rate?

Analysts expect that price pressures across Canada will ease marginally in June, albeit still well above the bank’s target. That said, consumer prices should mirror the recent performance seen in the US, where lower-than-estimated CPI data have reignited expectations of a sooner-than-anticipated interest rate cut by the Federal Reserve (Fed).

If the upcoming data aligns with these predictions, investors might consider that the BoC could ease its monetary policy further and go for another quarter-point interest rate cut, taking the policy rate to 4.50% at its July gathering.

According to the Minutes of its June meeting, the BoC has expressed concerns that progress on reducing inflation could stall, adding that officials considered the advantages of delaying interest rate cuts by an additional month before ultimately deciding to ease monetary policy on June 5.

Back to inflation, the BoC’s statement following the interest rate cut in June said, “With continued evidence that underlying inflation is easing, the Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain. The Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.”

Analysts at TD Securities argued that: “Markets are 70% priced for a cut, and we look for CPI… to add to the case for easing with headline/core CPI pushing 0.20/0.15pp lower (y/y)...”.

When is the Canada CPI data due, and how could it affect USD/CAD?

On Tuesday at 12:30 GMT, Canada is set to release the Consumer Price Index (CPI) for June. The reaction of the Canadian Dollar will largely depend on shifts in monetary policy expectations from the Bank of Canada (BoC). However, unless there are significant surprises in either direction, the BoC is expected to maintain its current cautious monetary policy stance, similar to the approach of other central banks like the Federal Reserve (Fed).

The USD/CAD has started the new trading year with a strong bullish trend, which eventually morphed into yearly highs north of 1.3800 the figure in April. However, that initial uptrend has gradually run out of steam and motivated spot to embark on a consolidative phase between 1.3600 and 1.3800.

According to Pablo Piovano, Senior Analyst at FXStreet, there is a high probability of USD/CAD maintaining its side-line theme for the time being as market participants remain focused on the Fed-BoC policy divergence as the almost exclusive driver of the price action. “This range-bound pattern appears to be underpinned by the always-relevant 200-day Simple Moving Average (SMA) at 1.3596 so far. On the upside, there is immediate resistance at the June top of 1.3791 (June 11) prior to the 2024 peak of 1.3846 (April 16),” Piovano said. “Conversely, if USD/CAD falls below the 200-day SMA, it could face additional losses, potentially dropping to the January 31 low of 1.3358. Beyond this, notable support levels are scarce until the December 2023 bottom of 1.3177, recorded on December 27.”

Pablo emphasizes that significant increases in CAD volatility would require unexpected inflation figures. A CPI below expectations could strengthen the case for another BoC interest rate cut in the upcoming meeting, thereby boosting USD/CAD. On the flip side, a CPI rebound might offer limited support to the Canadian Dollar. A higher-than-anticipated inflation reading would increase pressure on the Bank of Canada to maintain rates for a longer period, potentially posing prolonged challenges for Canadians dealing with higher interest rates.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD holds steady near 0.6250 ahead of RBA Minutes

AUD/USD holds steady near 0.6250 ahead of RBA Minutes

The AUD/USD pair trades on a flat note around 0.6250 during the early Asian session on Monday. Traders brace for the Reserve Bank of Australia Minutes released on Monday for some insight into the interest rate outlook. 

AUD/USD News
USD/JPY consolidates around 156.50 area; bullish bias remains

USD/JPY consolidates around 156.50 area; bullish bias remains

USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY. 

USD/JPY News
Gold: Is another record-setting year in the books in 2025?

Gold: Is another record-setting year in the books in 2025?

Gold benefited from escalating geopolitical tensions and the global shift toward a looser monetary policy environment throughout 2024, setting a new all-time high at $2,790 and rising around 25% for the year. 

Gold News
Week ahead: No festive cheer for the markets after hawkish Fed

Week ahead: No festive cheer for the markets after hawkish Fed

US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures