Canadian Inflation Creeping Higher, And Spending Up - CAD Up!

Published date: 20/07/2018

Canadians enjoy spending as figures increase. A strong set of Canadian data this afternoon as the annualised CPI rate is creeping up to show a reading of 2.5% vs 2.4% expected.  This a rise of 3 tenths from May to Jun and should firm up expectations of another Canadian rate hike, as well as be vindicating monetary policy.  Governor Poloz seems to have been under a little pressure for perhaps misleading the market on where he and his central bank colleagues see the economy, running, so on this evidence, price pressures are consistent with their view that the economy is running closer to full capacity.  

Retail sales in May was also much higher than expected, rising 2.0% on the month vs already high expectations of a 1.1% rise.  This adds fuel to the fire that rate normalisation is warranted, especially as high household debt remains a central bank concern.  

The reaction from the CAD is naturally positive.  Positioning is against the CAD at the moment and this should serve up a good reason to unwind a little.  A break under 1.3150 will be seen to be a near-term bearish signal, which should see us testing the mid 1.3000's again, and potentially lower.  Standing is the way is a strong appetite for USDs. This seems to have eased off since the comments from president Trump last night, so prospects for fresh lows in USD/CAD are looking promising.  


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