Canada’s CPI is expected to decrease in April in the midst of inflationary uncertainty for US tariffs.

  • Canadian inflation is expected to have lost more impulse in April.
  • The general consumer price index is expected to rise 1.6% compared to the previous year.
  • The Canadian dollar seems to have entered a consolidation phase.

All eyes will be placed in Canada statistics on Tuesday when you publish the April Consumer Price Index (IPC), a key inflation indicator that the Canada Bank (BOC) follows closely when establishing interest rates.

The general inflation is expected to have decreased dramatically, with the annual ipc forecast to fall 1.6% from 2.3% in March. However, in monthly terms, it is projected that inflation has increased slightly, rising 0.5% compared to the previous increase of 0.3%.

The Bank of Canada will also publish its preferred underlying inflation measures, which seek to eliminate volatile price fluctuations to obtain a clearer vision of underlying trends. In March, the underlying IPC of the Boc rose 2.2% compared to the previous year.

Although recent inflation data suggests that pressures on prices are moderating, markets are expected to act cautiously. The figures still do not reflect the total impact of commercial tariffs imposed by the US recently under the Trump administration, an element that could complicate the inflation perspectives in the coming months. As a result, it is likely that a cautious tone prevails between investors and those responsible for policies.

What can we expect from Canada’s inflation rate?

The Bock maintained its reference interest rate at 2.75% last month, pause after seven consecutive cuts and citing the growing uncertainty about US commercial policy as a key reason to retain its usual economic forecasts.

The officials said that the unpredictability of the tariffs imposed by the US and the potential of a broader global commercial conflict made it impossible to provide a reliable perspective. Instead of its regular quarterly projections, the Bank published two hypothetical scenarios to illustrate possible results:

In the most optimistic scenario, most tariffs are eventually eliminated through negotiations. The bank said this would probably result in a temporary slowdown in Canadian and global growth, with inflation falling to 1.5% for a year before returning to the objective of 2%.

A more severe scenario foresees a prolonged global commercial war. In that case, Canada would enter into a deep recession, and inflation would exceed 3% in mid -2026 before gradually decreasing to the target levels. The bank acknowledged that other results were possible, underlining the high degree of economic uncertainty.

In its annual financial stability report (FSR), the Central Bank acknowledged that the system remains resilient for now, but also indicated increasing vulnerabilities if commercial tensions continue.

The officials indicated the tariffs imposed by US President Donald Trump to Canadian goods and OTTAWA retaliation measures as potential threats. He said that, although the financial sector remains well for the moment, the ongoing tariff battles could eventually harm banks and financial institutions by making homes and companies manage their debt.

The BOC said that, in the short term, the unpredictability of the US commercial policy could trigger more market volatility and tighten liquidity. In more extreme cases, that type of turbulence could climb in a broader market dysfunction.

In the medium and long term, the bank said that a large -scale global commercial war could have serious economic consequences.

When will the Canadian CPI data be published and how could they affect USD/CAD?

April inflation data will be published on Tuesday at 12:30 GMT, and markets are prepared for a mixed panorama. While there is a general feeling that pressures on prices may have diminished something, details could go in any direction.

If inflation turns out to be higher than expected, it could lead to BOCs to adopt a more aggressive position, which could boost the Canadian dollar. On the other hand, softer figures would probably reinforce the expectations of more feats of fees, exerting pressure on the Loonie.

That said, an abrupt jump in inflation is not necessarily good news. I could lift red flags about the health of the Canadian economy and, ironically, that kind of surprise could end up weighing on the currency as well. In summary, the markets are observing closely, not only the general number, but the broader message that it sends about where politics and growth are directed.

Senior Analyst Pablo Piovano of FXSTERET said that the USD/CAD has entered a consolidation range just below its simple mobile (SMA) critical mobile average in 1,4012.

“If the Canadian dollar manages to overcome its 200 -day SMA, the short -term perspective should change to a more constructive, while allowing recovery to gain impulse. That said, the 55 -day SMA in 1,4098 should offer interim resistance before April’s maximum of 1,4414, established on April 1, with an additional barrier in the Pico de Marz Maximum of 2025 of 1,4792, published on February 3, “he added.

The resurgence of the bearish tone could motivate the USD/CAD to undertake a possible visit to its 2025 floor in 1,3838, marked on April 11, “Piovano said.” That would be followed by the minimum of November 2024 in 1,3817, with the following key support seen in the minimum of September 2024 of 1,3418.

From a technical point of view, Piovano said that the USD/CAD is currently pointing out a waiting status based on the relative force index (RSI) around the 50th threshold.

Economic indicator

Decision of the interest rate of the Bank of Canada (Boc)

He Bank of Canada (BOC) announces his decision on interest rates at the end of his eight meetings scheduled per year. If the Boc believes that inflation will be above the target (hard line), it will increase interest rates to reduce it. This is up to CAD, since higher interest rates attract greater foreign capital entries. Similarly, if Boc sees that inflation falls below the objective (Dovish), it will reduce interest rates to give an impulse to the Canadian economy in the hope that inflation will rise again. This is bassist for the CAD, since it deteries the entry of foreign capital into the country.


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Last publication:
LIE ABR 16, 2025 13:45

Frequency:
Irregular

Current:
2.75%

Dear:
2.75%

Previous:
2.75%

Fountain:

Bank of Canada

Economic indicator

Underlying Consumer Price Index of the Bank of Canada (Yoy)

Statistics Canada It is the entity responsible for publishing the underlying consumer price index. The underlying IPC includes fruits, vegetables, gasoline, oil, natural gas, mortgage interests, urban transport and tobacco. These eight volatile products are considered as key indicators about inflation in Canada. A high reading anticipates a firm posture of the Bank of Canada, and is bullish for the Canadian dollar.


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Next publication:
May 20, 2025 12:30

Frequency:
Monthly

Dear:

Previous:
2.2%

Fountain:

Statistics Canada

Source: Fx Street

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