Home Daily Commentaries Canadian CPI Escalates Over Sentiment

Canadian CPI Escalates Over Sentiment

Thursday 20 October, 2022

Daily Currency Update

Canada’s inflation remains the focus on what is next from the Bank of Canada next week on interest rates. With the Core CPI soaring to 6.0% from expectations of 5.6% and the headline number rising a 0.1% to 6.9% against projections of 6.8% has market participants jaw boning a 75 basis point hike from the BOC vs the expected increase of 0.50%  to the current rate of 3.25%. Oil price have been on a slow but steady rise firming up here today at 85.00 CAD dollar per barrel. Oil is having trouble finding support as demand for oil is in check with China slowing economy and an announcement from US President Biden ordering the release of 15 million barrels of oil to the demand-supply mechanism from the United States  Strategic Petroleum Reserve (SPR), may keep a lid on oil at 85.00 for the short term. The Canadian dollar is finding support and is currently trading at 1.3711 the 20-day moving average on a daily chart. We have already seen gains for the CAD against the USD in the overnight of 100 basis points. The currency pairs average true range, how much the USD/CAD moves in a day now exceeds 165 points. This represents a lot of volatility. Market participants can take advantage of the volatility and the major swings in pricing with limit order to capture prices when they are at their price target.

Key Movers

Overnight the British pound seems to be attempting to set a bottom at £1.1185 after its reversal from £1.1445 highs earlier this week. The USD/GBP pair dropped for the second consecutive day on Wednesday, weighed by negative inflation data and political uncertainty in the UK as the turmoil in the UK government, with the ruling Tory party plotting to replace the recently elected Prime Minister Liz Truss after her tax cut fiasco is adding negative pressure on the pair. Overnight British Prime Minister Liz Truss has been engulfed in yet more chaos, losing a second minister in a week with the resignation of Home Secretary Suella Braverman. The resignation letter also contained a scathing review of Truss’s leadership and indicated deep fissures in the heart of her government. Official figures released on Wednesday showed UK inflation rose to 10.1 per cent in September, returning to a 40-year high first hit in July, as the soaring cost of food squeezed household budgets.

Expected Ranges

  • EUR/CAD: 1.3480 - 1.3404 ▼
  • GBP/CAD: 1.5501 - 1.5365 ▼
  • AUD/CAD: 0.8670 - 0.8598 ▲
  • USD/CAD: 1.3806 - 1.3686 ▼