Low inflation pressures Canadian dollar

The Loonie dropped to a four-month low against the US dollar today after the Canadian consumer price index dropped below the Bank of Canada’s target.

As with the US and the eurozone, low inflation appears to be a problem for Canada at the moment, with today’s release of Canadian CPI data showing a 0.2% drop in prices month-on-month in October, taking the annual rate to 0.7%.

This result was below expectations and also below the low end of the Bank of Canada’s 1% to 3% target range. Governor Stephen Poloz dropped wording from the central bank’s last policy statement alluding to a future rate rise, ending a year-long tightening bias. With inflation now undershooting the target, the chances increase that the BoC’s next move might be a rate cut.

By mid-afternoon in New York, USD/CAD was up 0.14% at 1.0532, after hitting as high as 1.0569 earlier in the day, the weakest the Loonie has been against the US dollar since early July.

The weak CPI data was somewhat offset by a separate report showing unexpected strength in Canadian retail sales. Month-on-month sales rose 1.0% in September, versus expectations for a 0.5% increase, for a third successive increase. Retail sales are now up 3.6% year-on-year, picking up pace from the annual change of 2.7% seen for August. The strength here bodes well for how Q3 GDP might be looking.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.