Daily Currency Update

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Good news for Canadian inflation

CAD - Canadian Dollar

The Canadian consumer price index nearly doubled the forecast economists predicted.

The Consumer Price Index (CPI) rose 0.7% on a year-over-year basis in October, up from a 0.5% increase in September, led by higher prices for food. Excluding gasoline, the CPI rose 1.0% in October, matching the increase in September.

On a seasonally adjusted monthly basis, the CPI was expected to rise .2%. StatCan said that the CPI rose 0.3% in October.

When CPI beats the forecast, its good for the Canadian dollar. CPI is one of the most important inflation-related data points because of its scope.

Key Movers

The Great British pound outperformed Tuesday buoyed by reports a UK/EU trade deal could be brokered as early as next week. Sterling touched 1.3270 following commentary from top UK negotiators that suggested they had briefed Boris Johnson on the success of recent talks and expect a trade deal will be reached. While fishing rights and red tape remain a stumbling block, we expect at least a partial trade agreement will be signed, prompting another GBP push higher.

Having touched intraday and 12-week highs at 0.7340, the AUD retreated overnight forced lower as markets adopted a more cautious tone. Initially buoyed by positive sentiment and a risk on backdrop, the AUD tested resistance before investors absorbed profits and looked to correct positions as they balance short-term headwinds against medium and long-term optimism. These short-term headwinds are capping AUD upside, preventing an extension toward 0.74/0.75. Despite broad based US dollar weakness and a dire covid outlook, we expect the AUD to struggle to significantly extend the upturn ahead of a vaccine roll out. We anticipate the AUD will continue to enjoy the benefits of surges in risk demand as the pandemic narrative evolves.

Expected Ranges

EUR/CAD: 1.549 - 1.555 ▲

GBP/CAD: 1.733 - 1.740 ▲

AUD/CAD: 0.954 - 0.957 ▼

USD/CAD: 1.305 - 1.311 ▲