CAD flows: CAD softer after weaker CPI

USD/CAD has popped back above 1.37 after the combination of weaker than expected Canadian June CPI and stronger than expected US June retail sales. Headline CPI fell 0.1% against mket expectations of a 0.1% rise, and two of the three core measures that the BoC watch were weaker than expected as well. A BoC rate cut is now around 85% priced for this month’s meeting, and lower CAD yields have helped USD/CAD higher.  Even so, the upside should now be quite limited unless the market starts to unwind expectations of Fed easing in September, which seems unlikely unless we see some stronger US inflation data.