USD Soft Despite Inline Inflation Data

Friday, January 12, 2018

With an absence of domestic data and softer commodity prices, the CAD is trading lower today versus most currencies except the USD. The next important Canadian release is the Bank of Canada rate announcement and press conference scheduled for Wednesday. With recent economic data coming in strong, OIS is pricing about a 75% chance of a rate hike.

Inflation data in the form of CPI was a good print with CPI at expectations of 0.1% and core CPI beating at 0.3% versus expected 0.2%. Retail sales data was mixed as core retail beat at 0.4% while retail sales missed at 0.4% versus the expected 0.3% and 0.5%, respectively. Despite okay numbers, the USD is down versus most currencies due to relative strength in other economies. Good inflation information may leave room for a rate increase January 31.

The Euro is continuing the rally from yesterday trading at levels not seen since 2015 against the USD. German political parties have reached an agreement for a coalition Government and the market still expects monetary easing later in the year.

Equities are up in the USA and flat in Canada: the Dow is up 0.59%, the S&P 0.30%, the NASDAQ 0.28% and the TSX 0.00%. Crude Oil has paused, flat at 0.00% ($63.80) while Gold is up 0.48% ($1,328.80).

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