Published: 2024-03-19T12:44:11.000Z
CAD flows: USD/CAD higher as Canadian CPI comes in softer than expected
Senior FX Strategist
2
All the core measures monitored by the BoC saw a 0.2% drop in the y/y rate. Front end CAD yields have dropped sharply, suggesting scope for further USD/CAD gains.
USD/CAD moves sharply higher as all versions of CPI come in below market expectations. The three core measures that the BoC monitor, median, trimmed and common, all saw declines of 0.2% in the y/y rate to 3.1%, 3.2% and 3.1% respectively. Canadian front end yields have dropped around 10bps, more than justifying the USD/CAD rise of 30 pips. A 10 bp widening in the 2y spread has correlated with around a big figure rise in USD/CAD in the last few years, so there are some risks of further USD/CAD gains, especially given the generally firm USD tone.
