A Cool Headline CPI Print won't Result in CAD Selloffs - Scotiabank

profile-image
EnclaveFX Ltd
Jun 27, 2023
invoices

Before the Canadian CPI report, USD/CAD tests low 1.31 area. The outlook for the pair is analyzed by Scotiabank economists.

Trends remain CAD-positive

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.

Disclaimer

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell these assets. You should do your own thorough research before making any investment decisions. EnclaveFX Ltd does not in any way guarantee that this information is free of mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in the Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses, and costs associated with investing, including the total loss of principal, are your responsibility.

EnclaveFX Ltd and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. EnclaveFX Ltd and the author will not be liable for any errors, omissions, or any losses, injuries, or damages arising from this information and its display or use. The company is not responsible for errors or omissions.