Can the Loonie get back some of its pips from this week’s CPI reports? Here’s what you can expect from the event.
Inflation numbers (May 15, 1:30 pm GMT)
Canada’s consumer prices rose by 1.9% from a year ago in March, faster than the 1.5% increase seen in February. In fact, that’s the highest inflation rate since December!
On a monthly basis, prices had risen by 0.7% as markets had expected. Meanwhile, Bank of Canada’s closely watched core CPI had risen by 1.6%, also faster than February’s 1.5% pace.
The Loonie popped higher on the faster-than-expected CPI releases but soon gave up its gains thanks in part to traders packing up for a long Easter weekend.
This week analysts expect to see annual prices rise faster from 1.9% to 2.0% even as monthly core CPI is expected to slow down from 0.7% to 0.4% in April.
Remember that, thanks to the “dynamics of gasoline prices” the Bank of Canada (BOC) sees inflation dipping in Q3 2019 and staying below 2.0% for most of this year.
If we do see inflation climbing to 2.0% in April, then the Canadian dollar could get a boost across the board. But if the headline CPI and BOC’s core measures miss analysts’ estimates, then the Loonie could extend its bearish momentum from last week.
Oil and market sentiment volatility
In case you missed last week’s currency review, you should know that the Loonie ended the week mixed against its counterparts despite a jump in Canada’s labor market numbers.
The main culprit was the U.S. pulling the trigger on adding tariffs to China’s products, which caused uncertainty in the markets.
So while crude oil bulls can still get support from OPEC-led production cuts and sanctions on oil-producing countries like Venezuela and Iran, concerns over the U.S. future demand for the Black Crack could keep a lid on more oil gains this week.
Watch the newswires closely for updates on the U.S.-China trade saga in case they inspire intraweek trends for the Loonie!
Missed last week’s price action? Read CAD’s price recap for May 6 – 10!