When is the Canadian inflation data for November and how could it affect USD/CAD?
Canada’s Consumer Price Index (CPI) data for November is scheduled to be published today at 13:30 GMT.
Statistics Canada is expected to show that the headline inflation grew at an annualized pace of 2.4%, faster than 2.2% in October. Signs of price pressures rising at a faster pace would further diminish expectations of further interest rate cuts by the Bank of Canada (BoC) in the near term.
The BoC is unlikely to raise interest rates sooner as it reiterated in the monetary policy statement that the “current rate is at about the right level to keep inflation close to 2% as long as the economy and inflation evolve in line with projections”.
In the policy statement, the BoC also stated that the “underlying inflation is still around 2.5%”; however, the “CPI inflation will remain close to the 2% target as economic slack roughly offsets cost pressures linked to trade reconfiguration”.
How could Canada’s inflation data affect USD/CAD?
USD/CAD trades flat around 1.3773 during Monday's European trading session ahead of Canada's CPI data release. The 20-day Exponential Moving Average (EMA) slopes lower, and price holds beneath it, preserving a bearish bias and capping rebound attempts.
The 14-day Relative Strength Index (RSI) at 29 (oversold) signals stretched downside momentum. Measured from the 1.3549 low to the 1.4127 high, the 61.8% retracement at 1.3770 acts as key support; a close below it would extend the slide towards the 78.6% Fibo retracement at 1.3675.
On a bounce, the 50% retracement at 1.3838 stands as the initial barrier; failure to clear it would keep risks skewed to further weakness.
(The technical analysis of this story was written with the help of an AI tool)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.