Home Daily Commentaries Inflation slows in Canada as CAD dips against majors

Inflation slows in Canada as CAD dips against majors

Daily Currency Update

The Canadian dollar has dipped against most major pairs as inflation slows in Canada. Consumer Price Index (CPI) data released today shows year-over-year inflation rose 3.4% in May, representing the smallest yearly increase in inflation since June 2021. As CPI data is usually a strong indicator of where the country’s central bank will take interest rates, this lower inflation release may indicate a possible slowing of rate hikes. The largest contributor to the rise in CPI was mortgage costs, which are a result of higher interest rates. Excluding this figure, inflation is only up 2.5% in May, a telling sign that Canadians are feeling the impacts of higher interest rates.

Key Movers

The US dollar index (DXY) is down slightly amid the release of several positive data reports. US Durable Goods orders, which measure new orders placed with US manufacturers, were up 1.7% in May, versus the expected -1% dip. This data came in far higher than expected which may indicate that the US is recovering from inflationary pressures despite higher-than-usual interest rates. Another data report showed US consumer confidence rising to 109.7 for June from 102.5 in May. This report indicates that consumers have a brighter outlook for family finances in the future and often reflects prevailing business conditions.

European Central Bank’s (ECB) President Christine Lagarde spoke earlier today with a generally hawkish tone, “It is unlikely that in the near future, the central bank will be able to state with full confidence that the peak rates have been reached.” Lagarde implied in her comments that she expects more rate hikes for the Eurozone.

Australia is set to release CPI data tonight. This data is expected to be lower after the Reserve Bank of Australia recently hiked interest rates to an 11-year high.

India’s current account deficit is shrinking to $1.3 billion from $16.8 billion last quarter. This correction is largely due to robust service exports. A shrinking deficit implies that foreign countries are purchasing more from India, a sign of economic recovery.

Expected Ranges

  • EUR/CAD: 1.4328 - 1.4462 ▲
  • GBP/CAD: 1.67 - 1.681 ▲
  • AUD/CAD: 0.8763 - 0.8838 ▲
  • USD/CAD: 1.3117 - 4.3188 ▲