The Canada IPC will remain stable before the BOC meeting that could mark the end of relief

• The Canadian consumer price index is expected to remain stable at 2.6% year -on -year in March.
• The Bank of Canada will announce its monetary policy decision on Wednesday.
• The Canadian dollar maintains its strength against its American rival, with lower minimums ahead.

The Canada Statistics Office will publish the March Consumer Price Index (CPI) on Tuesday. Annualized inflation is expected to remain stable at 2.6%, coinciding with the February reading. Market participants anticipate a monthly advance of 0.7%, decreasing from the previous 1.1%. At the same time, the Bank of Canada (BOC) will publish its own estimates of the underlying IPC, which measure the underlying inflation by cutting volatile food and energy prices. According to the last publication, the underlying IPC of the BOC increased an intermencing 0.7% and an interannual 2.7% in February.

The figures are relevant before the Monetary Policy announcement of the Bank of Canada on Wednesday. It is widely anticipated that the Central Bank maintains the reference interest rate by 2.75%. The officials cut it when they met on March 12, the seventh consecutive cut, leaving the main rate at its lowest level since 2022.

The expected increase in inflation is more worrying about what policy responsible can show. The decision of the president of the United States, Donald Trump, to impose tariffs on practically all commercial partners has had their impact. The swing in Trump’s announcement still results in Canada being taxed with 25% tariffs on exports to the US.

Before the announcement, the USD/CAD pair quotes about the minimum of several months registered in early April in 1,3827.

What can we expect from Canada’s inflation rate?

BOC officials are well aware of risks related to the commercial war and its possible effects on the local economy. The slow growth and the greatest inflationary pressures are the core of concerns, not only in Canada.

Policies also anticipated volatile inflation levels in the midst of tariffs, but expected them to stay about 2% during the projection horizon. Will they keep such a vision? That is something that is yet to be seen after the publication of this IPC report.

The officials also expressed that the White House decision to impose massive tariffs “has emerged as an important source of uncertainty.” And it is not the only one. Investors are not sure of what Boc will do this week. While there is a great consensus that indicates a decision to maintain, there are a large part of analysts that anticipate another interest rate cut of 25 basic points.

A rate cut could be on the table if the IPC figures are below expectations. An increase in rates, on the other hand, seems unlikely at this time, although numbers higher than anticipated should lead to speculation that feat cuts have ended in the near future. A change towards a hard line posture could lead to a strongest Canadian dollar (CAD), although investors could contain their fire during the publication of the CPI pending the confirmation of the BOC a day later.

In addition, it is worth noting that the increase in recession fears could force BOC to cut interest rates, even if inflationary pressures increase more than anticipated in March.

As stated, uncertainty is high among all market participants. With that in mind, the reaction to the publication of data could be ephemeral and quickly overshadowed by new headlines related to tariffs.

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

The March Inflation Report of Canada will be published on Tuesday at 12:30 GMT, with market participants hoping that price pressures are maintained largely without changes compared to February. As usual, the divergence between market expectations and real figures will be responsible for the CAD reaction.

In general terms, numbers higher than anticipated would suggest that the BOC may need to adopt a more aggressive posture and, therefore, boost the body against other rivals. The opposite scenario is also valid, with softer readings of the anticipated suggesting that the BOC could continue cutting rates. However, at the same time, an acceleration pronounced in price pressures could generate concerns about Canadian economic health and, therefore, weigh on the CAD.

Valeria Bednarik, chief analyst of FXSTERET, points out: “Before the announcement, the Canadian dollar consolidates profits against the beaten US dollar (USD). The daily graphic of the USD/CEC show Mobile, with the simple mobile average (SMA) of 20 accelerating south below a SMA of 100 flat, both above the current level.

Bednarik adds: “The USD/CAD is in pause before top -level events, but the technical risk remains downward. The monthly minimum in 1,3827 is the immediate support before the 1,3470 region. The CPI needs to be surprisingly bad to trig Gains to 1.4000 will probably attract seller interest. “