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According to Andrew Grantham, an analyst at CIBC, the Bank of Canada will likely raise rates in October despite today’s inflation data, supporting the Canadian dollar.  

Key Quotes:  

“August inflation wasn’t a big market-mover, but over the past year the currency has been swayed slightly more by CPI results than GDP. That largely reflects the bigger surprises in CPI data on average. However, it could also show that investors are paying too much attention to such data. Even though the BoC’s mandate is inflation, its decisions seem to have been driven more by surprises in GDP growth recently. That’s because growth is a guide for future inflation and, as we’ve seen in the past two months, the CPI figures can be choppy on a month-to-month basis.”

“We don’t expect the BoC to read too much into this month’s headline pullback or core uptick, and hike interest rates in October as long as there’s a resolution to NAFTA uncertainty. That would support the C$ in the near-term.”