USD/CAD Back to Lows Despite May Canadian CPI Missing Expectations
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Earlier today, Canada’s National Statistics Agency released the May Consumer Price Index, providing a temporary setback to the Canadian Dollar. The data showed headline CPI decelerated, coming below market consensus at +1.5% y/y from +1.7% y/y in April, and +0.4% m/m from +0.3% m/m the preceding month. At such time, with the Canadian economy still in transition away from commodities, that Bank of Canada should continue maintaining a neutral stance after easing twice in 2015. Meanwhile, Core CPI was in line with expectations at 2.1% y/y and 0.3% m/m.
The overall increase in 12-month Headline Inflation was driven primarily by a +3.2% y/y increase in Alcoholic Beverages and Tobacco products, a +2.0% y/y increase in Household Operations and Furnishings and a +1.8% y/y rise in Food items.
Chart 1: USD/CAD 1-minute Chart: June 17, 2016 Intraday
Immediately after the release, USD/CAD pushed off of its lows of the day, near C$1.2873, reaching as high as C$1.2900 at the time this report was written. Continued underperformance in inflation figures may prompt the Bank of Canada to reassess its neutral tone, but at this point in time, with energy prices remaining bolstered and Prime Minister Justin Trudeau’s fiscal stimulus package in tow, today’s data doesn’t constitute a big enough sample size to cause the Canadian Dollar to detach from broader risk trends.
UPDATE: Chart 2: USD/CAD 1-minute Chart: June 17, 2016 Intraday
--- Written by Christopher Vecchio, Currency Strategist and Diego Colman, DailyFX Research
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