On Wednesday, new data on Canadian inflation is due and could impact on Bank of Canada policy expectations and USD/CAD. Analysts at Wells Fargo, point out that CPI jumped more than expected in May, led by increases in several transportation-related costs, and the main focus on Wednesday will be to what extent that jump is reversed with the release of the June CPI.
“Lower gasoline prices will probably partly weigh on the CPI and overall we expect most if not all of the May jump to be reversed. With our forecast for the headline CPI to slow to 1.9% year-over-year. We expect the central bank’s core CPI inflation measure’s to print close to (or above) the 2% inflation target midpoint.”
“Given a quickening in wage inflation, we would not be surprised to see Canadian inflation trends remain modestly elevated in the near-term. The Bank of Canada held its policy rate steady this week, and while we don’t expect CPI trends will prompt the central bank to tighten, the Bank of Canada appears unlikely to join other G10 central banks in easing monetary policy.”