Canadian CPI highlights the North American economic calendar

The Canadian dollar is riding the wave of broad US dollar weakness at the moment in a move to 1.3610 but it will have its own reasons to move at the bottom of the hour.

That’s when the July CPI report will be released. Expectations are for y/y inflation to continue to fall, this time down to 2.5% from 2.7%. That’s despite what’s expected to be a +0.4% m/m reading.

The three measures of core inflation — median, trim and common — will also be a factor in the market reaction. They’re expected to tick slightly lower on a y/y basis.

For the Bank of Canada ,the market is pricing in a 99% chance of 25 bps on Sept 4 with a slight chance of 50 bps. Through year end, 72 bps are priced in with 151 bps priced in by this time next year, which would bring the overnight target to 3.00%.

With Canadian housing not responding to the two rate cuts so far and the economy slowing, I think the BOC has the opportunity to be more aggressive but I doubt that happens, even with a cool CPI. Given that, I wouldn’t expect a big move on today’s data.

This article was written by Adam Button at www.forexlive.com.