CAD CPI Preview: what to expect of USD/CAD

Canada will publish its inflation figures for the month of August and July’s retail sales later in the NA session.

Consumer prices in the Canadian economy are expected to have gained 1.4% on a year to August, higher than July’s 1.3% gain. Inter-month, the CPI is expected to revert July’s 0.2% drop and advance 0.1%.

Core prices tracked by the Bank of Canada, instead, are seen at 0.2% MoM and 2.0% over the last twelve months.

Markets expect Retail Sales to have expanded 0.1% on a monthly basis during July and 0.5% excluding the Autos sector, both prints improving June’s contractions of 0.1% and 0.8%, respectively.

In view of ‘Rates, FX and Commodities Strategy’ at TD Securities, “For USDCAD, our high-frequency fair value models suggest the pair looks overvalued, targeting a move back to 1.30. Market positioning also suggests that the short squeeze may persist, indicating further pressure on USDCAD over the next few days. That said, US election risks will soon drift onto investors’ radar screens, limiting declines in the greenback, so look to scale back into long USDCAD positions on dips below 1.30”.