USD/CAD: There is some room for a rebound in the near term – ING

Canada releases inflation figures for September today. Economists at ING analyze USD/CAD outlook ahead of the Consumer Price Index (CPI) report.

BoC might be more tolerant of inflation bumps

Expectations are for no MoM change after the 0.4% August print, which would leave the YoY rate at 4.0%. Core measures are expected to slow down very marginally and stay close to 4.0%.

Market expectations for Bank of Canada tightening have remained high compared to the Fed, with 20 bps priced in for January. The still very tight jobs market argues against having a dovish turn, but there is a good chance that with higher market rates doing the tightening in Canada, the BoC will be more tolerant of bumps in the disinflation path.

Given market pricing, the balance of risks appears tilted to the upside today. USD/CAD has moved back to the 1.3600 area, but there is some room for a rebound in the near term.

See – Canada CPI Preview: Forecasts from five major banks, decelerating trend