Usdcad Gains On Soft Canadian Inflation

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Usdcad Gains On Soft Canadian Inflation

Usd/Cad Gains On Soft Canadian Inflation

The rally in USD/CAD continues and can be seen near 1.3680, only a few pips away from the 1.3700 resistance. The recent upside in the USD/CAD was due to the recent inflation data, which showed a softer reading.

Now that Canadian inflation has turned a lot more than the forecast, there's now a higher chance that the BoC will move towards policy easing in the near future.

However, some traders are confused as to why the CAD is losing against the USD even though the inflation is going down. In simple terms, lower inflation means the BoC will start to lower the interest rate, which is negative news for the CAD.

Canadian Cpi Reached 2.8% Y/Y In February

The data showed that the Canadian CPI in February was 2.8% on a y/y basis, a lot lower than the forecast of 3.1%. Additionally, the previous month's CPI print was 2.9%, which shows a consistent deflation trend.

look at the headline CPI on monthly basis showed a jump of 0.3% which was also below the forecast of 0.6%. However, this reading was still higher than the 0% print seen in January.

The recent inflation data from Canada shows that the BoC is highly likely to adopt a different tone at April's meeting. According to economists, the BoC will likely adopt a dovish tone and even talk about the timing of rate cuts.

According to Macquarie's head of economics, the last two months show a consistent slowdown in inflation. As a result, it is very probable that the BoC will likely use a dovish language on the 10th of April. However, he added that any talks of rate cuts will still be premature at this stage.

With the Canadian inflation out of the way, the next key event is the Fed meeting which is due in a few hours. In this regard, the Federal Reserve will likely keep the interest rates unchanged but will likely deliver its statement about the next course of action.

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