The Canadian CPI could force the BOC’s Hand

Central banks, including the Canadian Bank of Canada (BOC) are having a tough sell convincing investors they will hold up to their own end of the bargain, accommodative policy. This is inducing some trepidations in the global Forex markets. For example, speakers from the Federal Reserve (US), continue to state a hike is on the way. However, long term Treasury yields continue to fall. Other central banks are commanding the attention of the market. The Bank of Canada, who may have to deal with a surprise in the CPI print today. Which could boost the Canadian dollar.  The Canadian central bank may have to bolster recent hawkish comments from Governor Poloz.

Thursday saw a retail sales print out of Canada. The market began to price in a rate hike for the Bank of Canada at their monetary policy announcement in July. The futures for a rate hike are now better than fifty percent. The retail data shows Canada’s consumer confidence, in the retail sector, is off to the best year in fifteen years.

Canadian Dollar could get a Boost on the CPI

There are lingering concerns in Canada, about household debt to income ratio, which is the highest in the G-7, but a strong core consumer price index (CPI) print, today, could force the USD/CAD lower, as this Forex market breaks below a key rising trend line. Thus supporting the Loonie. This would then see this Forex market challenge the May 5 low. This would be confirmed with a weekly close below the technical support level lining up at 1.3165.

As such, there should be some volatility in the Loonie Forex markets Friday up until and after the CPI print later today.