CAD: Breaking News for Canada: USD/CAD Falls as Inflation Declines for Third Month in a Row

Oct 19, 2022
VOT Research Desk

Market Insights, Considerations & Analytics

Actual Canadian Annual CPI 6.9% vs. Prevailing 7% (Projection 6.8%)

Canadian Composite CPI Exact Year-Over-Year 6% vs. 5.8% in Prior Year

The Canadian CPI increased by 6.9% YoY in September, which was less than the 7% print in August. This is the third month in a row that headline inflation has decreased. Gasoline prices fell, which caused the decline, while food prices continued to climb. The CPI increased by 0.1% on a monthly basis, while core inflation rose to 6% YoY from 5.8% in August.

The Bank of Canada (BoC), which aims to prevent inflation from becoming entrenched, appears to have benefited from front-loading rate increases as inflation decreased in both July and August. Governor Tiff Macklem’s latest remarks, however, seem to imply that any optimism for a pivot may be misplaced. He said that more needs to be done because inflation won’t go away on its own.

The USDCAD fell initially in response to the data release by about 20 pip. One final upward push before the bears reappear may be indicated by the breach of the declining trend line on the 2H chart.

The pair is still overextended and in need of a pullback over longer time horizons. Before hitting resistance around the confluence region around 1.3950, the Canadian dollar had fallen about 8% against the US dollar over the last two months.

Technical Indicators

USD/CAD

 Daily Moving Averages