USD/CAD, EUR/CAD flows: CAD gains modest after stronger CPI
USD/CAD is slightly lower, but EUR/CAD is unchanged on the day which looks like an under-reaction
Canadian CPI was on the strong side of expectations, with only the common CPI measure coming in slightly on the weak side. Headline, core, median and trimmed measures were all on the strong side. The CAD is higher in response, although only modestly. Canadian front end yields are little changed on the day in an environment where global yields are a little lower. While the apparent resilience of inflation in the latest data is a little concerning, the market doesn’t see this as a reason to significantly price in less or slower BoC easing at this stage.
USD/CAD was already trading some way below levels that looked consistent with recent yield spread moves, so the muted CAD gains aren’t a major surprise. However, EUR/CAD is unchanged on the day, and some rise against the EUR looks appropriate in view of the data.