Before the Canadian CPI report, USD/CAD tests low 1.31 area. The outlook for the pair is analyzed by Scotiabank economists.
According to consensus, May's CPI will rise 0.4% (Scotia 0.5% MoM) for a 3.4% rise over last year.
Inflation may have decelerated over the past year, to some extent, but monthly price gains remain substantial and progress on core inflation has stalled in recent months.
As for core prices, higher frequency measures have recently indicated that core pressures are picking up again; that is, the core median measure is expected to drop to 4.0% in May from 4.2% in April. With these details not evident from the headline, any CAD sell-off may be short-lived and likely reverse if the core measures remain elevated.
It is likely that the CAD will gain further, broader gains in the near future as the trends look positive on cross-country lines.
Inflation is expected to decelerate sharply in May, according to six major banks' forecasts.
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