According to analysts at ING, the stunning 3% headline Canadian CPI print will likely perk up the ears of CAD bulls like them – although it’s worth acknowledging that much of this was driven by surging gasoline prices (CPI inflation excluding gasoline came in at 2.2% YoY).
Key Quotes
“Still, with core inflation hovering around 2% and activity data also fairly upbeat, under normal circumstances, we’d certainly be talking more loudly about another Bank of Canada rate hike in 2018.”
“While there is a lot to like about CAD based on domestic fundamentals, we note macro data is the only bright spot.”
“Oil prices which took a hit lower after EIA data showed a large inventory build and broader geopolitical uncertainties are keeping a lid on the loonie for now.”
“Our short-term USD/CAD fair value model estimate is 1.28-1.30, although we’ll need some of these external risks to fade before we see a move in this direction.”
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