USDCAD Pops Above 1.37 After the Canadian Inflation
USDCAD jumped almost 70 pips higher off the lows yesterday, with the support at 1.36 holding, after Wholesale Sales showed a 0.8% decline.
USDCAD jumped almost 70 pips higher off the lows yesterday, with the support at 1.36 holding, after Wholesale Sales showed a 0.8% decline. However, the jump stalled short of 1.37 as traders were anticipating a soft CPI inflation report for June, which was released a while ago.
Rates will largely hinge on consumer demand, and despite persistently high borrowing costs, real retail sales saw a decline in June, as indicated by RBC’s latest credit card data. With today’s release of the Canadian CPI report, the upcoming rate decision by the Bank of Canada holds significant weight for next week.
The market currently anticipates a 75% probability of an interest rate cut. The housing market is facing challenges, and recent data has shown signs of weakness. This potential cut would mark the second consecutive reduction and may establish a trend of cuts at each meeting until the end of 2024, with the market pricing in reductions totaling 60 basis points.
Canada June CPI Inflation Report
- Canada June CPI: 2.7% (vs. 2.8% expected)
- Prior month: 2.9%
- CPI m/m: -0.1% (vs. 0.0% expected)
- Prior m/m: +0.6%
Core Inflation Measures:
- CPI Bank of Canada core y/y: 1.9% (vs. 1.8% prior)
- CPI Bank of Canada core m/m: -0.1% (vs. 0.6% prior)
- Core CPI m/m SA: +0.1% (vs. 0.3% prior)
- Trim: 2.9% (vs. 2.9% prior)
- Median: 2.6% (vs. 2.8% prior, revised to 2.7%)
- Common: 2.3% (vs. 2.4% prior)
This marks the lowest year-over-year reading since the pandemic, likely solidifying a rate cut on July 24. This would mean consecutive cuts, sparking concerns about the potential continuation of a cut-every-meeting trend. In response, USD/CAD rose to 1.3687 from 1.3666, mainly due to the US dollar strengthening as US retail sales surpassed expectations. The monthly decline was driven by lower prices for travel tours (-11.1%) and gasoline (-3.1%). Decreased prices for durable goods (-1.8%) also contributed to the overall CPI moderation in June, with auto prices dropping 0.4% year over year. However, an increase in food prices from stores (+2.1%) helped to moderate the overall slowdown.
USD/CAD Live Chart
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