Canadian Dollar Weakens – Can Crude Oil Prices Weigh On Canada CPI?

Today at 13:30 (GMT), the Statistics Canada will publish the November Consumer Price Index and economists are expecting a drop in inflation. Here’s why:

Economists are expecting headline inflation to decline by 0.4% on the month, more than October’s 0.3%.

The CPI targeted by the Bank of Canada is expected to reduce to 1.8% from 2.4% in October. Meanwhile, the BOC projected a 2.3% average inflation rate in the fourth quarter.

Looking at the current figures, it is already signaling a likely downward revision in January.

The massive drop in crude oil prices is indeed assumed to translate into a drop in gasoline prices that will weigh on the Canadian economy’s inflation rates. This is because Canada’s energy sector accounts for almost 11% of nominal Gross Domestic Product (GDP) – Government revenues from energy were $10.3 billion in 2016.

In October, gasoline prices declined 3.2% on the month and are very likely to drag the Canadian inflation figures down. Which is why the commodity currency is getting weaker.

For the moment, the USD/CAD is trading bullish at $1.3470 and can face strong support at $1.3420. While the resistance can be seen at $1.3520 today.

Support Resistance
1.3405 1.3511
1.3345 1.3558
1.3238 1.3664
Key Trading Level: 1.3451