USD/CAD Resumes the Bullish Trend, as PPI Inflation Surges in the US Too
Skerdian Meta • 2 min read
The USD/CAD has been on a bullish trend since the beginning of June, when it reversed at $1.20, following a long decline from $1.47. We saw a deep pullback in this pair in October, and early last week, we saw another fast reversal when the price fell around 250 pips. But, the 20 SMA (gray) was providing support on the daily chart, so we predicted that a reversal might come at that area, since the US inflation remains high.
Last week’s CPI (consumer price index) report showed another increase to 6.8%, while today’s PPI (producer price index) report also increased. This is forcing the FED to turn even more hawkish. The USD/CAD has reversed higher now, after bouncing off the 20 SMA, so the bullish trend continues.
Canadian CPI Inflation Report
- Prior report
- CPI YoY 4.7% vs 4.7% estimate. Last month it came in at 4.7% as well. This month equalled the highest level since February 2003.
- CPI Core YoY 3.6% versus 3.8% last month
- CPI MoM 0.3% vs 0.3% estimate
- CPI Core MoM 0.2% vs 0.2% last month
- Higher prices for gasoline (+43.6%), furniture (plus 0.7%) and food (+4.4%) were the main drivers of growth in the headline CPI
- Excluding gasoline CPI 3.6% YoY unchanged from October
- Prices rose in eight major components on a year-over-year basis in November. Transportation and shelter prices contributed most of the increase
- Goods +6.9% versus 6.5% in October
- Services +2.9% versus 3.2% in October
- Declines in prices for cellular services (-17.9%) contribute to the slow down in the service prices
Core measures of inflation YoY
- Common CPI 2.0% year on year versus 1.8% last month
- Median CPI 2.8% versus 2.0% last month
- Trimmed 3.4% versus 3.3% last month
US PPI Inflation Report
- US November PPI YoY +9.6% vs +9.2% expected
- October PPI was +8.6%
- PPI MoM +0.8% vs +0.4% expected
- Core PPI ex. food and energy YoY +7.7% vs +7.2% expected
- Core CPI MoM +0.7% vs +0.4% expected
The US dollar is slightly stronger on this, particularly against the commodity currencies, as risk trades slip, due to high inflation and fear of a hawkish Fed tomorrow. When your input prices are rising nearly 10% in a year, there’s a good chance that’s getting passed on.
Keep an eye on gold, which is down by $9, to $1777. It’s not getting any love from the inflationist.