When is Canadian CPI report and how could it affect USD/CAD?

Canadian CPI Overview

Wednesday's Canadian economic docket highlights the key release of domestic consumer inflation figures for November, scheduled to be published at 13:30 GMT. The headline CPI is anticipated to have edged lower by 0.1% during the reported month as compared to a 0.3% increase recorded in the previous month. Conversely, the yearly rate is anticipated to rise to 2.2%, from 1.9% prior, while the BoC's core CPI is expected to hold steady at 1.9%.

As analysts at TD Securities explained: “Gasoline prices fell by 9.4% m/m last November, and more modest declines this year should see the year-ago drag from energy diminish by 0.2pp. Higher food prices should help offset the month-over-month decline in gasoline, while muted base-effects to CPI-trim and CPI-median present a high bar for any pullback in core CPI, which should leave the average of the three near 2.1% y/y.”

How could it affect USD/CAD?

Ahead of the important releases, the USD/CAD pair was seen hovering around mid-1.3100s, well within the striking distance of 1-1/2 month lows set earlier this week. A stronger reading might be enough to provide an additional boost to the Canadian dollar and prompt some aggressive selling. The pair then might turn vulnerable to break below the 1.3100 handle and aim towards testing late-October swing lows support near the 1.3045-40 region.

Alternatively, a softer reading might prompt some near-term short-covering bounce, though any meaningful recovery seems more likely to remain capped near the 1.3200 handle. However, a sustained strength beyond the mentioned hurdle should assist the pair to aim back towards challenging the very important 200-day SMA, currently near the 1.3230 region.

Key Notes

USD/CAD benefits from WTI strength ahead of Canadian Inflation data

USD/CAD edges lower to 1.3150 area ahead of Canada CPI data

Canada: CPI inflation likely to firm to 2.2% YoY in November – TDS

About BoC's Core CPI

Consumer Price Index Core is released by the Bank of Canada. “Core” CPI excludes fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products. These volatile core 8 are considered as the key indicator for inflation in Canada. Generally speaking, a high reading anticipates a hawkish attitude by the BoC, and that is said to be positive (or bullish) for the CAD.