Home Daily Commentaries Inflation jumps to 18-year high

Inflation jumps to 18-year high

Daily Currency Update

CAD - Canadian Dollar

The Canadian dollar strengthened against the US dollar on Wednesday after data showed that annual inflation in Canada increased at its fastest rate since February 2003. USDCAD was down 0.32%, trading at 1.2320 at the time of writing.

The consumer price index rose 4.4% in September from a year earlier, according to Statistics Canada. Economists had expected a 4.3% rise.

The hot inflation reading — driven by higher housing, food and transportation prices — puts a bright spotlight on the Bank of Canada ahead of next week’s rate decision. Some investors expect the first interest rate hike to come in April to help curb rising prices, but this is sooner than the central bank’s guidance.

Key Movers

Yesterday, ECB’s chief economist Philip Lane spoke on interest rate hikes, stating that “market expectations for future interest rates do not square with the European Central Bank's guidance for no hike until inflation is seen stably at 2%.” EURUSD was up 0.13% trading at 1.6464 at the time of writing.

The UK continues to rally against a number of majors, particularly the US dollar, as GBPUSD hit monthly highs on Tuesday, just below $1.3850. The main reason seems to be related to aggressive US dollar selling. However, Bank of England Governor Andrew Bailey has already alluded to the fact that the BoE will raise interest rates by the end of the year, to counteract the growing inflation within the economy. GBPUSD was up 0.16% trading at 1.3814 at the time of writing.

The Australian dollar extended its upward direction on Wednesday and pushed above 0.75 US cents. Despite an absence of headline macroeconomic datasets and news flow, risk appetite shifted higher and drove global equities, rates and commodity currencies upward. AUDUSD was up 0.55% at 0.7513 at the time of writing.

A continued correction in US treasuries have dampened demand for the US dollar through the last five days as markets re-adjust expectations for US Federal Reserve policy in 2022. Safe haven currencies were the day's big losers on Tuesday as a risk rally drove the USD, JPY and CHF all lower. The US dollar continued to dip today against a basket of major currencies, trading at 93.63 on the The US Dollar Index.

Expected Ranges

  • EUR/CAD: 1.4345 - 1.4393 ▼
  • GBP/CAD: 1.6972 - 1.7068 ▼
  • AUD/CAD: 0.923 - 0.9261 ▲
  • USD/CAD: 1.2319 - 1.2369 ▼