Canadian and US Data Keeping USD/CAD in a Range
USD/CAD bounced off the top of the range last week and yesterday's data from the US and the inflation report from Canada left it unchanged
Yesterday we witnessed some USD strength, which was supported by a number of positive US economic indicators. The retail sales control group exceeded expectations by rising 0.7% compared to the 0.3% that was expected. Although the headline retail sales figure was weaker, the market looked beyond that and the USD gained additional strength.
Consequently, commodity currencies, as a whole, experienced weakness against the USD. However, the Canadian dollar (CAD) performed relatively well due to a strong consumer inflation report (CPI). As a result, USD/CAD fell around 60 pips. Although the decline in this pair to 1.3405, was completely reversed later, influenced by a decline in crude Oil prices and equities.
The April Consumer Price Index (CPI) report for Canada revealed a year-over-year increase of 4.4%, surpassing the 4.3% recorded in March. This marks the first acceleration in inflation since June 2022. The main contributors to this rise were higher rental prices and increased mortgage interest costs. On a monthly basis, the CPI rose by 0.7%, up from 0.5% in March, with gasoline prices playing a significant role in this increase.
The CPI rose by 0.6% MoM, while the core CPI (excluding volatile components) rose by 0.7%. Although these numbers are not reflected in the year-over-year (YoY) figures, they are still considered disappointing and could potentially prompt the Bank of Canada (BOC) to deviate from its previous stance of maintaining a pause in its policy.
Canada CPI Report for April 2023
- April CPI YoY 4.4% versus 4.1% expected
- March CPI YoY was was 4.1%
- CPI YoY 4.4% vs 4.1% expected
- CPI MoM 0.7% vs +0.4% expected
- Prior MoM reading was 0.5%
- Gasoline prices -7.7% vs -13.8% y/y in prior month (largest decline since July 2020)
- Gasoline prices 6.3% m/m vs -1.2% prior month. The gain was the largest since October 2022 and contribute the most to the CPI gain this month
- Food 9.1% vs +9.7% y/y prior
- Mortgage interest costs 4.9% y/y vs 5.4% increase in March. Year-on-year interest costs +28.5%. Rents increased by 6.1% in April
Core measures:
- BOC core CPI y/y 4.1% vs 4.3% last
- BOC core CPI m/m + 0.5% vs +0.6% prior
- Median CPI 4.2% vs 4.3% expected. Prior 4.6%
- Trimmed mean CPIP 4.2% vs 4.1% expected. Prior 4.4%
- Common CPI 5.7% vs 5.5% expected. Prior 5.9%
USD/CAD Live Chart
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