USDCAD moves higher after Canadian trimmed CPI and core retail miss consensus



The Canadian trimmed CPI y/y came in at 5.1%, less than the previous 5.3% y/y and below the consensus of 5.2% y/y. This measures consumer inflation but excludes the 40% most volatile items. Core retail sales also declined, printing at -0.6% m/m/ against the -0.1% expected.

The USDCAD forex pair (top chart) finds itself in its bullish area (red arrow) between the upper blue and red bands. This is leading the US/Canadian 2-year spread (bottoms chart). The spread is neutral between its blue bands, but is threatening to move into the bullish area between the upper blue and red bands. This would suggest that the spread is widening in favour of the US 2-year note.

The US CPI release from last week points to a stickiness to inflation. The 2-year note serve as a good proxy for central bank policy, and the swivel in favour of the US note suggests that the Fed is more hawkish than the BoC. Given the Canadian trimmed CPI and lower than anticipated core retail number, this is not surprising.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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