Canadian CPI Inflation YY* (Nov) 3.1% vs. Exp. 2.9% (Prev. 3.1%)

Reaction details (13:51)

• In reaction to the stronger than expected headline inflation, USD/CAD fell from 1.3372 to 1.3350 in an immediate reaction.


• 1.3350 is a double bottom in USD/CAD and once the price pushed through the support level, the move extended lower to hit lows of 1.3335 20 minutes later.

Analysis details (14:38)

The Canadian inflation data rose 3.1% in November, matching the prior pace but above the 2.9% forecast, while the M/M rose 0.1%, despite expectations for a 0.1% decline. Core inflation rose 2.8%, accelerating from the prior 2.7% with M/M rising 0.1%, easing from the 0.3% in October. The BoC core measures, Trim, Median and Common, rose 3.5% (prev. 3.5%), 3.4% (prev. 3.6%, rev. 3.4%), and 3.9% (prev. 4.2%), respectively, taking the average to 3.6% from the prior revised 3.7%. Given the BoC dropped language from their statement in the December meeting about upside risks to inflation, the hotter than expected headline could cause some concern. However, with the Y/Y matching the prior pace, it may be more appropriate to worry about the path lower to 2% from the current c. 3% levels. Meanwhile, the average of the BoC's preferred measures, which strips out more volatile components of the inflation report, saw a slight dip and will likely offset any hot fears on the headline numbers. BoC Governor Macklem recently noted that he expects the BoC to cut rates sometime in 2024, but needs to see several months of sustained downward momentum in core inflation first. The Governor also noted that the 2% inflation target is now in sight, but BoC is not there yet although the conditions increasingly appear to be in a place to get there.

19 Dec 2023 - 13:30- Fixed IncomeData- Source: Reuters