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Canada’s inflation numbers are up this week! What are analysts expecting? More importantly, can the report extend the Loonie’s rally?

Inflation reports (Oct 16, 12:30 pm GMT)

Consumer prices edged 1.9% lower from a year ago in August, which was slower than the 2.0% growth seen in July and the 2.0% uptick that markets had expected.

Prices also dropped 0.1% on a monthly basis after seeing a 0.5% increase in July. Meanwhile, the Bank of Canada (BOC)’s closely watched annual core inflation slowed down from 2.0% to 1.9%, the lowest in four months. Yipes!

Not surprisingly, the Loonie lost pips across the board and barely came up from air during the U.S. trading session.

This week analysts see the headline monthly inflation slow down further from -0.1% to -0.2%. The annualized version is expected to tick higher from 1.9% to 2.0%, however, so it’s not all gloom and doom.

Meanwhile, the consumer price index (CPI) measures that BOC is tracking are expected to maintain status quo, with the common CPI seen at 1.8%, median CPI estimated at 2.1%, and trimmed CPI expected at 2.1%.

Unless the core numbers or any of the three CPI measures significantly miss or outperform analysts’ estimates, it’s likely that we’ll see continuation of the Loonie’s rally from strong crude oil prices and Canada’s latest labor market data.

Overall risk sentiment

It ain’t just domestic data that boosted Loonie’s prices higher last week! If you recall, the comdoll also found support from rising crude oil prices and a bit of risk appetite from the U.S.-China “Phase 1 deal.”

This week pay attention to escalating geopolitical tensions in oil-producing regions. The Black Crack popped higher late last week when it was reported that Iranian oil tankers were hit in the Middle East.

If Iran decides to retaliate, or if similar attacks happen in the next couple of days, then we could see some support for the Loonie.

Meanwhile, markets cheered a partial deal between the U.S. and China that involves the latter buying U.S. agricultural goods in exchange for the Trump administration hitting the pause button on additional tariffs. Question is, how long can the “verbal” truce last?

Missed last week’s price action? Read CAD’s price recap for Oct. 7 – 11!