USD/CAD Jump on Softer Canadian Inflation Fails
USD/CAD failed to stay above 1.32 and has reversed back down, heading for 1.31 again, which shows that selling pressure is prevailing here
USD/CAD has been on a bearish trend since the beginning of June, when it was trading above 1.3650, where it formed a resistance zone. Attempt to reverse the price higher have been met by sellers at moving averages which have been acting as resistance and the major retrace in early June which took the price around 300 pips higher, also failed.
Sellers resumed the downtrend and pushed the price below 1.31, reaching the lowest since September last year. The Bank of Canada (BoC) increased its interest rates by 0.25 percentage points (25 bps) last week, as anticipated by most economists, which has had a positive impact on the CAD as well. BoC Governor Macklem has stated that the central bank is ready to implement further rate hikes.
Although, by taking action now, the BoC avoids potentially having to implement even more significant measures in the future Besides that, today’s inflation report showed that it cooled off more than expected in June. So, I don’t think we will see any more rate hikes by the BOC. Although markets are mainly trading the USD sentiment so the pressure remains to the downside for this pair and we will try to sell retraces higher.
Details of Canada’s CPI for the Month of June 2023
- June CPI YoY 2.8% versus 3.0% expected
- May CPI Yoy was 3.0%
- June CPI MoM 0.1% vs +0.3% expected
- Prior MoM CPI reading was 0.4%
- Gasoline prices -% vs -18.3% y/y in prior month
- Gasoline prices % m/m vs -0.8% prior month
- Ex gasoline +4.0% y/y vs +4.4% prior
- Food +8.3% y/y vs +8.3% y/y prior
- Mortgage interest costs 30.1% y/y vs 4.9% increase in May
- Goods inflation +1.4% vs +2.1% y/y prior
- Services inflation +4.2% vs +4.9% prior
Core measures:
- BOC core CPI YoY 3.2% vs 3.5% expected (prior 3.7%)
- BOC core CPI MoM -0.1% vs +0.4% prior
- Median 3.9% vs 4.0% prior
- Trim 3.7% vs 3.8% prior
- Common 5.1% vs 5.2% prior
There’s no reason for the Bank of Canada to continue to raise interest rates. USD/CAD is up to 1.3218 from 1.3200 on this data but some of that move is as a result of broad US dollar strength on a strong US retail sales report released at the same time.
USD/CAD Live Chart
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