CAD to USD Rate Stuck in a 100 Pip Range Ahead of Canada Inflation
The exchange rate of CAD to USD continues to consolidate in a 100-pip range, as it remains stuck between moving averages.
The exchange rate of CAD to USD continues to consolidate in a 100-pip range, as it remains stuck between moving averages. In a while, we will have the Canadian February inflation report, which is expected to remain unchanged from January, with the CPI remaining sticky around 3.3%-3.4% levels since November.
USD/CAD Daily Chart – The 100 SMA Is Acting As Resistance
Will the price break out of the range today?
Expectations for Canadian February CPI
- The Canadian February CPI Y0Y is expected at 3.1% vs 2.9% prior
- February CPI MoM measure is seen at 0.6% vs. 0.0% prior.
- Median CPI is expected to remain unchanged at 3.3% vs 3.3%^ in January
- The Trimmed CPI YoY is also expected to remain unchanged at 3.4% in February
Bank of Canada and CAD Impliccations
With the Bank of Canada thinking about starting to cut interest rates, today’s CPI report will be analyzed within the framework of the BOC’s policy reaction function. During their meeting earlier this month, the central bank highlighted that although inflation has been declining, future progress in reducing prices will be slower and more uneven, with lingering upside risks.BOC Gov Macklem mentioned that inflation is expected to remain close to 3% until the middle of the year but is projected to ease in the second half, with no return to 2% inflation expected in 2024.
Despite this, the Bank of Canada remains concerned about risks to the inflation outlook and the persistence of underlying inflation, preferring to see more sustained progress in lowering core inflation before considering a shift to looser policy. So, the attention from the BOC will be mostly on underlying inflation metrics, which are critical to them.
If the forthcoming report contains another miss across the board, the central bank will most likely take it positively, especially given the recent slowing in wage growth indicated in labour market statistics. A failure is projected to pull the Canadian dollar down, which would send USD/CAD above the 100 daily SMA, while a higher CPI reading may not have a substantial impact on market dynamics, since traders are already prepared for the Bank of Canada to start reducing interest rates soon. Whether it will be now or a little later makes little difference, so the risks for the CAD are to the downside, which means bullish for USD/CAD.
USD/CAD Live Chart
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