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Inflation surges to highest level in a decade

Wednesday 18 August, 2021

Daily Currency Update

CAD - Canadian DollarThe Canadian dollar edged slightly lower against the US dollar after data showed inflation in Canada climbed higher than anticipated in July, its highest level in a decade. USDCAD was up 0.4%, trading at 1.26280 at the time of writing.The domestic inflation rate increased to 3.7% in July, up from 3.1% in June. Analysts had expected a rise of 3.4%. The cost of shelter and durable goods went up at a fast enough pace to push the cost of living up to its highest level since 2011, according to Statistics Canada data. On the other hand, oil prices went up after slumping for a few days. But the outlook for oil demand remained uncertain for some investors, as global movement is starting to get restricted again due to the rising cases of COVID-19 worldwide.

Key Movers

Inflation in the eurozone ticked up to 2.2% year-over-year in July, This was up from the previous reading of 1.9%, but in line with analyst expectations. EURUSD was trading around 1.1711 at the time of writing. Data showed that inflation in the UK fell to 2% from 2.5%. Many were expecting a slight retracement this month, with many restrictions in the hospitality sector lifted earlier last year compared to this. What would have usually prompted a selloff in sterling didn't materialize. Also yesterday's fall in GBPUSD meant another drop was less likely. An improvement in global risk sentiment after a few days of market jitters on the back of poor Chinese data, and the Taliban reclaiming control of Afghanistan which saw stock markets fall seems to have to come to an end, and is also likely supporting sterling. GBPUSD was up 0.18%, trading around 1.3764 at the time of writing. Having broken the recent July low, the Australian dollar is now vulnerable to further risk-led corrections and changes in RBA policy expectations. Analysts are eyeing Thursday’s labor market print for the first real look into the impact of the Sydney lockdown on the labor force. An uptick in the unemployment rate could well force the AUD through 0.72 and toward supports at 0.70. AUDUSD was down 0.15% and trading around 0.72432 at the time of writing. Demand for the US dollar moved higher against a basket of currencies ahead of the release of the Federal Reserve’s July meeting minutes tomorrow. Growing COVID-19 concerns both domestically and globally had the market on edge, and a sharp decline in US retail sales through July sent investors chasing haven assets such as the dollar. The dollar index advanced 0.5% overnight, buoyed by a steep correction across the GBP and EUR, even extending through 109.55 against the Japanese yen.

Expected Ranges

  • EUR/CAD: 1.4772 - 1.4815 ▲
  • GBP/CAD: 1.7322 - 1.7374 ▲
  • AUD/CAD: 0.9136 - 0.9169 ▼
  • USD/CAD: 1.2605 - 1.2645 ▲