USD/CAD: Loonie is likely to remain supported for now – Commerzbank

Economists at Commerzbank analyze CAD outlook ahead of the Canada Consumer Price Index (CPI) report.

Will the Canadian inflation data be able to convince?

As the market does not really currently believe in another rate hike in September (the likelihood stands at 30%) the inflation data might fuel expectations, in particular of course if it surprises on the upside. To dissuade the market from its sceptical approach regarding a further rate step the data would have to surprise very significantly though. As price pressure seems to be easing globally in most countries, this might also be the case in Canada.

It is questionable whether that would be sufficient for the BoC though. It is likely to remain hawkish as long as the data does not convince; and (core) inflation data is unlikely to convince today. For that reason, CAD is likely to remain supported for now, and we see further upside potential against USD over the coming weeks.

See – Canada CPI Preview: Forecasts from five major banks, better inflation, but not yet good enough