DailyFX.com -
- Canada Consumer Price Index (CPI) to Slow After Holding at 2.1% for Last Two-Months.
- Core Inflation to Retain the Fastest Pace of Growth Since April 2012.
Trading the News: Canada Consumer Price Index (CPI)
A slowdown in Canada’s Consumer Price Index (CPI) may generate a further advance in USD/CAD as it gives the Bank of Canada (BoC) greater scope to retain its current policy throughout the remainder of 2014.
For more updates, sign up for David's e-mail distribution list.
What’s Expected:
Click Here for the DailyFX Calendar
Why Is This Event Important:
However, the stickiness in core inflation may heighten the appeal of the loonie as it puts increased pressure on central bank Governor Stephen Poloz to adopt a more hawkish tone for monetary policy, and the USD/CAD may face a larger pullback ahead of the October 22 policy meeting should the report boost interest rate expectations.
Expectations: Bearish Argument/Scenario
| Release | Expected | Actual |
| Raw Materials Price Index (MoM) (AUG) | -1.5% | -2.2% |
| Gross Domestic Product (MoM) (JUL) | 0.3% | 0.0% |
| Retail Sales (MoM) (JUL) | 0.5% | -0.1% |
Easing input costs along with the slowdown in private consumption may generate a marked slowdown in price growth, and a dismal CPI print may generate fresh monthly highs in USD/CAD as market participants scale back bets for higher borrowing costs.
Risk: Bullish Argument/Scenario
| Release | Expected | Actual |
| Business Outlook Future Sales (3Q) | 28.00 | 35.00 |
| New Housing Price Index (YoY) (AUG) | 1.5% | 1.5% |
| Average Weekly Earnings (YoY) (JUL) | -- | 3.3% |
However, higher wage growth paired with expectations for a faster recovery may boost price pressures in Canada, and a strong inflation reading should spur a bullish reaction in the Canadian dollar as it raises the BoC’s scope to further normalize monetary policy.
For LIVE SSI Updates Ahead of Canada’s Inflation Report, Join DailyFX on Demand
How To Trade This Event Risk(Video)
Bearish CAD Trade: Headline & Core Inflation Slows in September
-
Need green, five-minute candle following a dismal CPI report to consider long USD/CAD entry
-
If the market reaction favors a bearish Canadian dollar trade, establish long with two position
-
Set stop at the near-by swing low/reasonable distance from cost; use at least 1:1 risk-to-reward
-
Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bullish CAD Trade: Consumer Price Report Tops Market Expectations
-
Need red, five-minute candle following the release to look at a short USD/CAD trade
-
Carry out the same setup as the bearish loonie trade, just in the opposite direction