- Canada inflation expected to fall to 3.2%
- United States publishes FOMC minutes
Continue having a quiet week. In the European session, USD/CAD is trading at 1.3709, down 0.12%. We could see a stronger move in the North American session, with the release of Canada’s inflation report.
Canadian inflation expected to fall
Canada’s inflation rate has been falling and markets are hoping for good news from today’s inflation release. October inflation is expected to have eased to 3.2%, compared to an increase of 3.8% in September. On a monthly basis, the CPI is expected to rise to 0.1%, up from -0.1% in September. The trimmed average CPI, a key gauge of core inflation, is expected to fall to 3.6%, down from 3.7% in September.
Expectations for the upbeat inflation report are based on the sharp decline in gasoline prices, which fell about 10% in October. In addition, the rise in food prices has slowed. Inflation is still well above the 2% inflation target, but it has been moving in the right direction and another drop will be an encouraging sign for the Bank of Canada.
The central bank has kept rates at 5% in its last two meetings, as GDP has slowed and the labor market is showing some cracks in its resilience. The BoC has stressed that it is prepared to raise rates again if necessary, but another pause in the December meeting will raise expectations that rates have peaked and there is talk of a rate cut in mid-2024.
All eyes will be on the Federal Reserve, which will publish the minutes of its November meeting today. At the meeting, the Federal Reserve kept rates between 5.25% and 5.50% for the second consecutive time. Fed Chair Powell took a hawkish stance after the meeting, saying inflation remained too high and leaving the door open to further rate hikes. The minutes will probably have a similar message and that could give a boost to the slow ones.
- 1.3638 and 1.3552 provide support
- There is resistance at 1.3741 and 1.3827