Summary:
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Canadian CPI Y/Y: 1.7% vs 1.8% expected
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3 core measures now all stand at 1.9%
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EURCAD looking to make a break higher
A big North American session for economic events has begun with a larger than expected fall in the latest Canadian inflation data. The CPI Y/Y for November dropped to 1.7% from 2.4% previously against expectations of 1.8%. A large part of the drop can be accounted for due to the recent plunge in oil prices, so a fairer reflection of the underlying price pressure can be arrived at by taking an average of the three “core” measures. The first of these, the common CPI Y/Y remained unchanged at 1.9% as expected, but the other two both showed negative surprises. The Median CPI Y/Y dropped to 1.9% with a median forecast for it to remain at 2.0% while the Trimmed CPI Y/Y fell from 2.1% to 1.9% against expectations of it being unchanged.
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Inflation pressures in Canada have pulled back of late with a large decline in the CPI Y/Y while an average of the 3 core CPI measures has dropped to 1.9%. Source: XTB Macrobond
Digging in more depth it wasn’t just the fall in energy prices that caused these drops, as you may expect with the gasoline component declining 9.4%. The ex-gasoline measure was down by 0.1% with declines also seen in goods (-0.7% M/M) and Services (-0.1% M/M). Hopes for a BOC hike next month were low heading into today’s data and after the declines they have likely been all but extinguished.
Given the soft data the market reaction has been surprisingly muted with no real moves seen of the back of it and CAD remaining mixed on the daty. Source: xStation
The best performing currency against the Canadian dollar today is the Euro and the EURCAD pair has in fact moved up to its highest level in almost 5 months. This week has seen a clear push higher in this market as prior resistance at 1.5125 has turned into support and attracted buyers. Price is now firmly back above the 200 day SMA and the outlook is looking encouraging going forward with 1.5475 and 1.5590 the next swing level to look to on the upside.
EURCAD is trading close to a 5-month high today and the market is looking to make a firm push higher after breaking above the 200 day SMA once more at the start of the week. Source: xStation
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