Analysts at TD Securities note that the Canada’s May CPI surprised sharply to the upside, with headline inflation firming to 2.4% y/y as prices rose by 0.4% on the month (market: 2.1%, 0.1%).
Key Quotes
“Core CPI also improved from April, with the average of the Bank of Canada’s preferred measures rising from 1.90% to 2.07% y/y.”
“This should provide the Bank some comfort with its current policy stance and allow them to push back against market pricing for cuts. However, any potential rate hikes are still a long ways off, with a number of obstacles to clear beforehand.”
“FX: CAD caught a bid and will fuel speculation that better days remain ahead. However, we require much improved activity data to confirm. In the short-term however, CAD may enjoy a better bid on the crosses (like EUR and AUD) than against the USD, where it trades a touch rich.”
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