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Canadian Dollar Faces Crucial Weeks: Inflation Report and Retail Sales to Shape Rate Expectations

Canadian Dollar Faces Crucial Weeks: Inflation Report and Retail Sales to Shape Rate Expectations
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The Canadian dollar has continued to edge lower against its US counterpart since the start of the year, with the USD/CAD pair beginning the week around the 1.34 level, which is around its highest level since the middle of December. We are entering into a highly important couple of weeks for the Canadian dollar.

Tuesday’s inflation report will be a highly important one in guiding Bank of Canada interest rate expectations. Economists are pencilling in a monthly contraction in headline consumer prices (-0.3% consensus), which would be only the second negative print in the past year.

Retail sales data on Friday should also give policymakers a decent barometer as to how well consumer spending held up towards the end of last year, as we head into the January BoC meeting next Wednesday. No change in rates is seen, although the tone of the bank’s communications will held investors gauge whether we can expect a first cut as early as April, which is currently more than fully priced in by swaps.


Enrique Díaz-Álvarez

Enrique Díaz-Álvarez

Analyst at Ebury – a leading global fintech company specialized in international payments, collections, and foreign exchange services for SMEs and midcaps. Ebury offers foreign exchange activity in over 130 currencies as well as cash management strategies, trade finance, and FX risk management. Authorised and regulated as an electronic money institution. Regulary ranked among the top forecasters in Bloomberg's FX forecast accuracy rankings. Ebury analysts also provide financial market reports in Polish, available on FXMAG.PL.


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