The Canadian dollar’s strength since the start of the month was close to being called into question as key inflation data surprised the markets, with the Bank of Canada’s Consumer Price Index posting a substantial drop to 1.5%, well under the expected 1.8% mark.
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The loonie did concede a bit of ground against the US dollar as a result. Sterling on the other hand failed to capitalise on the drop in sentiment and continued to see it’s early month rises reverse throughout the day's trading.
The fact we are close to the best levels to buy pounds with Canadian dollars in almost 3 weeks despite yesterday’s release goes some way to highlighting the lack of trust in the pound at present.
Importantly tomorrow the Bank of Canada (BoC) governor Poloz is due to speak and may well be called to comment on the weak Consumer Price Index (CPI) release. Given how much the BoC have commented slowdown in prices with the unpredictability of the Canadian economy at the moment, any sign of further caution from Poloz could see the markets lose interest with the loonie, potentially providing a bit of respite for the pound.
Last week, Canada’s export industry came under considerable scrutiny after China began to retaliate to North American trading tactics by banning shipments of specific Canadian goods to Chinese shores.
To counter this however, it seems that Canada are now close to agreeing new terms with the US to have the recent steel tariffs imposed by President Trump lifted.
This could hold real weight with the currency markets as a result of Canada’s economy being so reliant on it’s international trade balance. Talks are due to be held until Friday, progress here could well spark new trends and CAD exchange rates.
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