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16/07/24
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CAD Flat After Canadian CPI
On Tuesday, the Canadian dollar showed limited movement and USD/CAD traded at about 1.3687, up 0.03% for the day in the North American session.
Canada posted a weaker-than-expected June inflation report. In June, the yearly inflation rate dropped from 2.9% in May to 2.7%. This was lower than the 2.9% market estimate. This was the same as April’s three-year low.
Food prices rose while gasoline prices fell sharply. In June, CPI declined by 0.1% monthly, down from May 0% and lower than the market forecast of 0.1%. This was the first drop since Dec. last year.
Core inflation, which didn’t include the sharp decline in energy prices, edged up to 1.9% y/y, from May’s 1.8%. This was higher than the estimate of 1.6%. Core inflation declined by 0.1% monthly, sharply lower than May’s 0.6% gain and lower than the forecast of 0.4%.
The Bank of Canada will be happy with the inflation print, as core inflation stayed below the 2% target and headline inflation dropped. The central bank will next meet on July 24 and markets have increased the chances of a rate cut at the meeting to 88%. This is higher than the 82% likelihood before the inflation release. Canadian retail sales will be released on Friday, the last key data before the rate decision.
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