Canada December CPI 1.6% vs 1.7% y/y expected

Canadian December inflation data:

• Prior was 1.4% (unrevised)
• CPI -0.5% vs -0.4% m/m expected
• BOC core CPI 1.9% vs 2.1% exp
• Prior BOC core 2.0%
• BOC core -0.4% m/m vs -0.3% exp
• Prior BOC core -0.3%

The year-over-year numbers paint a skewed picture because of comparables but two consecutive large decreases in the BOC core should be worrisome for Poloz. He brushed aside those worries at the BOC but another month or two of falling core inflation and a cut will be right back on the table.

The story today, however, is oil and the Canadian retail sales report was strong so CAD is surging for a third day.