Canada: CPI will keep CAD on the defensive – TDS

Canada will release headline CPI data today at 13:30 GMT and the market consensus is an increase of 0.2% m/m and 2.3% y/y. Strategists at TD Securities deliver their forecast and the effects on the Canadian dollar.

Key quotes

“We look for headline CPI inflation to firm to 2.4% y/y in January, reflecting a 0.3% increase on the month.”

“With a cloud of uncertainty hanging over the global growth outlook due to the viral outbreak, we suspect that USD demand will remain in vogue; 1.3220 should offer support (~200dma) while the 1.3305 level (2020 high) will mark notable resistance.”

“On the crosses, we expect CAD to trade on the defensive. One major exception is the EUR which has been under relentless pressure. We do not see this ebbing anytime soon and we think EUR/CAD can bleed towards 1.42/43 in the coming weeks.”