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Canadian consumer prices came out significantly above expectations, with CPI rising by 1.1% and Core CPI at 0.7%. The Canadian dollar is strengthening – USD/CAD is making a sharp fall. Update.

Price rises were expected to accelerate, but not at this pace: the headline consumer price index rose by 1.1%, after 0.3% last month. Expectations were for a rise of 0.7%. But it isn’t only global commodity prices (which Canada enjoys through oil prices) that were on the rise. Also Core CPI jumped by 0.7%, more than double the expectations for 0.3% and far stronger than 0.2% last month.

This may push the Bank of Canada to move on the rates earlier than expected. Just last week, Mark Carney and his colleagues left the rates unchanged at 1%. They are already off the bottom of 0.25%, but after three rate hikes, they are still very low.

Contrary to the US, where the central bank can focus on low Core CPI and dismiss the more volatile headline number, the BOC has nothing to hold on to – all prices are rising. There is room for a rate hike in Canada, as the economic situation is rather good.

USD/CAD now trades at 0.9583, falling sharply from 0.9630 before the release. This is lower than the bottoms seen in the past few days, but still above the record lows of 0.9526 seen earlier in the month – 30 month lows.

Support is at 0.9510, followed by 0.9416. Resistance is at 0.9667, followed by 0.98. For more levels, analysis and upcoming events, see the Canadian dollar forecast.