Canada inflation seen cooling down in June as traders focus on BoC-Fed policy divergence
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The Canadian Consumer Price Index is expected to lose some traction in June. The BoC reiterated that inflation is heading towards the target. The Canadian Dollar remains stuck within the 1.3600-1.3800 range vs. the US Dollar. Canada is set to reveal the latest inflation data on Tuesday, with Statistics Canada publishing the Consumer Price Index (CPI) for June. Forecasts predict disinflationary pressures to resume in both the headline CPI and the Core CPI following May’s hiccup. In addition to the CPI data, the Bank of Canada (BoC) will release its core Consumer Price Index, which excludes volatile components such as food and energy. As witnessed, the BoC core CPI showed a 0.6% monthly increase and a 1.8% year-on-year rise in May, while the headline print rose by 2.9% over the last twelve months and 0.6% from the previous month. These figures are closely monitored as they could influence the Canadian Dollar (CAD) in the short term and affect perceptions of the Bank of Canada’s monetary policy, particularly after the central bank reduced its policy rate by 25 bps to 4.75% in June. Looking at the FX world, the Canadian Dollar keeps navigating the 1.3600-1.3800 range vs. its American counterpart, while the floor of this range still appears propped up by the key 200-day SMA (1.3596). What can we expect from Canada’s inflation rate? Analysts expect that price pressures across Canada will ease marginally in June, albeit still well above the bank’s target. That said, consumer prices should mirror the recent performance seen in the US, where lower-than-estimated CPI data have reignited expectations of a sooner-than-anticipated interest rate cut by the Federal Reserve (Fed). If the upcoming data aligns with these predictions, investors might consider that the BoC could ease its monetary policy further and go for another quarter-point interest rate…
Filed under: News - @ July 16, 2024 8:15 am