The economists of ING analyze how Canadian inflation data could affect USD/CAD and BoC rate hike expectations.
Canadian CPI could put a BoC rate hike back on the table
Any upside surprise in the inflation numbers would likely put a BoC rate hike back on the table, although it is not our base case at this time to see another move from the Bank of Canada.
Markets are pricing in 15 basis points to a high, and we could see it pushed to 20 basis points or more after a strong CPI reading today.
Given its overvaluation, we have been warning of a USD/CAD correction for some time: the pair is reversing (i.e. falling) with short-term fundamentals, and a possible recovery after the IPC could take it to 1.3400.
Source: Fx Street
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