The CAD may ease a little more in the short run before recovering – Scotiabank

Loonie trades little changed after Friday’s sharp tumble. Canadian CPI data on Tuesday will be key to determining how far the CAD slide extends, economists at Scotiabank report.

Lower inflation may weigh a bit more on the CAD in the short run

The CAD slipped off its high Friday all too easily, with the USD rebound threatening to undo some (at least) of the CAD’s strength that it has accumulated over the past week following the Bank of Canada rate hike. 

There is a little data out today (Wholesale Sales for May are expected to rise 1.0% in the month) but CPI data on Tuesday may be key in determining how far the CAD slide extends in the short run (headline expected to dip to 3.0%, the top of the BoC’s medium term target range). 

Lower inflation may weigh a bit more on the CAD in the short run but policymakers have been clear that progress beyond 3% is expected to be harder to come by. This will not be any sort of ‘all clear’ signal. 

The CAD may ease a little more in the short run before recovering.

See – Canada CPI Preview: Forecasts from five major banks, better inflation, but not yet good enough