CAD flows: CAD fails to gain significantly on strong CPI

The CAD is not much changed in spite of much stronger than expected February CPI data, with all the BoC’s core measures above expectations as well as a sharp increase in the headline rate. While Canadian yields have risen on the data, the market is more concerned with the effects of tariffs going forward than the current CPI, and is also concerned that higher CPI will mean lower real incomes and lower growth.  USD/CAD was in any case trading some way below the level associated with current yield spreads, with the CAD strengthening in the last couple of days helped by a better general risk one, even though yield spreads had moved in the USD’s favour. So it’s looking hard for USD/CAD to make progress sub-1.43 as long as the current tariff threat is maintained. Even so, the higher than expected CPI data should prevent USD/CAD pushing higher.