USD/CAD goes back as Canada inflation stabilizes in May

• The USD/CAD quotes about 1,3710 while the traders digest the latest Canada inflation report.
• The underlying IPC data of the Canada Boc for May are published in line with the analysts’ forecasts.
• Policy perspective of the Bank of Canada (BOC) – Market data shows a 38% probability of maintaining the rate at the July meeting.,

The Canadian dollar (CAD) is reacting to the latest consumer price index (CPI) published by Canada statistics on Tuesday, which showed that inflation remained stable in May.

The USD/CAD is quoting around 1,3710 after the publication, with the markets reassessing the perspectives of feat cuts.

Summary of Canada CPI data

May inflation data in Canada showed that the underlying IPC of the BOC increased 0.6% (MOM) in May, slightly above the previous reading of 0.5%. The interannual figure remained stable at 2.5%.

The general CPI met expectations, increasing 0.6% (MOM) and 1.7% (yoy).

The underlying IPC of the BOC, which excludes volatile components such as food and energy prices, is considered a more precise measure of underlying inflation.

What does this mean to the Bank of Canada?

With the BOC maintaining its key rate at 2.75% during the June policy meeting, the governor of the BOC, Tiff Macklem, expressed concerns about tariffs and the increase in input costs. The governor declared that the Central Bank is closely monitoring both the general CPI and business feeling.

The strongest monthly impression of the underlying IPC indicates pressures of persistent prices, which could lead to the Canada Bank to delay rates cuts while continuing to monitor the dynamics of inflation and its implications for monetary policy. With the underlying IPC still around 2.5%, the data of the Canadian market show a 38% probability of maintaining the rate at the July meeting.

USD/Cad market reaction

The USD/CAD was adjusted after the publication, since the traders reduced the expectations of a relief by the BOC in the coming months, unless the economy shows signs of weakness.

The pair continues to quote between the simple mobile average (SMA) of 20 days, which provides support in 1,3697, and the 50 -day SMA, which acts as a resistance in 1,3798.