The Bank of Canada got its final look at inflation data today ahead of the September 6 rate-setting meeting. Prices rose a surprising 0.6% in the month compared to 0.3% expected and core prices rose 0.5% m/m.
That number has helped to boost the implied hike odds at the upcoming meeting to 30%, with a full hike priced in by next March. I wrote yesterday why I expect USD/CAD to rise to 1.40 and if the Bank of Canada does hike in September, it would be a big mistake that would only add to the case for a recession later.
For today, the high CPI reading has been balanced by a decline in oil prices. WTI crude oil is down $2.05 to $80.46 today on worries about China after poor data today on industrial production and retail sales. A decline this week would break a 7-week streak of gains in crude.
As for USD/CAD, the overall moves aren't large today with the pair up just 15 pips. Risk aversion is high today but the US dollar is retracing as yields fall on a flight to safety.
