CAD CPI meets forecasts; US stocks due a pullback?

Summary:

• Canadian CPI Y/Y: 2.0% vs 2.0% exp

• Core measures little changed; CAD drifts lower

• Wall Street pulls back; US500 dips below H1 cloud

The focus today in the economic calendar has been mainly on inflation with the UK and European figures out this morning before the Canadian equivalent in recent minutes. Overall there’s not been much surprise movement in price pressures according to these with the data on the whole pretty much in line with forecasts. The Canadian CPI year-on-year rose by 2.0% in June, as was predicted by the consensus forecast after the prior showed a 7-month high of +2.4%. 

In Canada a core reading is typically arrived at by taking the average of the following 3 measures (all in Y/Y terms):

• Median: 2.2% vs 2.1% exp. 2.2% prior - revised up from 2.1%     

• Common: 1.8% vs 1.8% exp. 1.8% prior

• Trimmed: 2.1% vs 2.2% exp. 2.3% prior

The mean average of these is just above 2.0% and remains close to the middle of the 1-3% threshold that is the BOC’s inflation target. Source: xStation

The market reaction to the data hasn’t been huge, but there is a notable drop seen in the Canadian dollar since the release. The Loonie was trading higher against most of its peers before the news dropped but has since fallen back a bit. USDCAD has been trending lower for much of the past month after the prior high CPI reading and a dovish shift from the Fed sent the market tumbling down near the $1.30 handle. 

USDCAD has seen a bit of a rise in the initial reaction but the market still remains not far from recent lows above the 1.30 handle. Source: xStation   

As far as US stocks are concerned there’s not too much to go on in terms of macro releases today, with some housing data the only noteworthy figures. Building permits for June came in at 1.22M vs an expected 1.30M and a prior 1.29M. At the same time housing starts also dipped, printing 1.25M from 1.27M last time out. The consensus called for 1.26M. 

In year-on-year terms both the number of housing permits and housing starts is in negative territory for the US. Source: XTB Macrobond 

Wall Street has begun the week a little on the soft side with some measured declines seen so far and after such a strong run higher it appears that the bulls are taking a breather. There’s some suggestion that the short-term trend has turned lower and while the prevailing longer-term trend remains firm the recent high of 3023 could be an interim peak and is therefore worthwhile keeping an eye on for potential resistance. 

The S&P500 futures have dropped below the Ichimoku cloud on H1 and this could be seen to possibly signal a change in the near-term trend lower. Highs of 3023 potential resistance. 3003 possible support. Source: xStation