Canada: All eyes on the CPI figure – BBH

Analysts at BBH point out that Canada reports January CPI figures today and prices are expected to have bounced back after falling 0.4% in December.  

Key Quotes

“The base effect suggests that even a 0.5% m/m increase, which is what is expected, will not prevent the y/y pace from slipping to 1.5% from 1.9%.  The underlying measures are expected to be steadier.  Still, after yesterday's disappointing retail sales report, which comes on the heels of other soft data, the market has downgraded the chances of an April hike.  Interpolating the odds from the OIS suggest chances of a rate hike have slipped to about 44% from 54% a week ago.” 

“The Canadian dollar is little changed on the day, but its 1.2% loss on the week gives it the dubious honor of the second weakest of the majors this week.  It was eclipsed by the 2.25% loss for the Swedish krona after Sweden also reported a softer than expected inflation report earlier this week.  The US dollar reached its best level against the Canadian dollar this year with yesterday's push to CAD1.2755.  The technical indicators favor the greenback but do not rule out a consolidative session ahead of the weekend.”