Core Canadian CPI Breaches Threshold, Putting BoC on Alert
USD/CAD– Canadian consumer prices in February slipped to 1.6% from 1.9%, surpassing estimates of 1.4% as energy costs dropped by -1.2%. The core reading which strips out energy costs unexpectedly rose to 2.1% from 2.0%, which is above the BoC’s threshold. Policy makers focus on the core reading as it is less volatile and the increase in broader prices could force the central bank to raise inters rates sooner than expected. A strong labor markets is fueling domestic demand and putting upward pressure on prices. Prices rose 0.4% in February was led by gains in recreation and clothing of 3.0% and 1.2% respectively. The increase in the costs of discretionary items is a clear sign that price appreciation could continue. To discuss this and other topics, please visit the USD/CAD forum.
EUR/USD– German producer prices saw their pace of decline slowed on an annualized basis to -2.9% from -3.4%, as costs were flat in February. A 0.6% drop in energy prices offset a gain of 1.3% in mining. Increases in food and machinery could be a sign that broader price growth is returning. Higher input prices will put pressure on manufacturers to pass along the higher costs to consumers. A rise in inflation in the region’s largest economy could force the ECB to raise rates sooner than expected. However, consumer prices are far from the target level of 2.0% which makes a rate hike unlikely over the near-term. To discuss this and other topics, please visit the EUR/USD forum. Monitor and mouse not working
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