Canadian inflation rises as expected and CAD likes it
The CAD has been on the front foot in recent sessions, and with the latest inflation readings showing a recovery towards 2.0%, we have seen the USD/CAD rate retesting sub 1.3300 after annualised CPI came in at 1.9% - up from 1.5%. Median and trimmed CPI rates were even better at 2.0% and 2.1% respectively, beating forecasts of 1.8% in each case.
This now means that the BoC could hold its neutral stance on rates, maintaining the prospects of further tightening dependent on data. Looking ahead to the next BoC, there as a sense that there could be a dovish shift, so this has been eroded by the latest data.
To boot, we also get a better than expected trade balance for Feb, coming in at a C%2.9bln deficit. Exports were more or less in line with expectations, while imports were lower than expected.
From here, USD/CAD may look to test the mid 1.3200's where we note the next strong band of support, thereafter sub 1.3200. Lows around 1.3275-80 seen so far, while CAD/JPY has been lifted back above 84.00 again.