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Markets Eye Canadian Inflation Numbers | US Dollar Rebounds After Strong Data

Published December 18, 2019

  • Canadian CPI numbers were released at 8:30 am EST, and markets got exactly what they were expecting, a modest month-on-month decline in the Core CPI index, and the year-on-year numbers to hold steady at 1.9%.  This index excludes volatile items such as fruits, vegetables, and gasoline, and is a key indicator used by the Bank of Canada to gauge inflation.  The Canadian dollar, which has stalled slightly after an impressive start to December, is unchanged after the news.  Next up for the loonie is Retail Sales on Friday, where a surprise CPI reading in either direction could dictate its direction heading into the Christmas break.
  • After slumping to a five-month low last Thursday, the US dollar has been climbing back higher after this week’s manufacturing, housing, and service sector numbers showed signs of resilience in the US economy.  The data has helped lower the probabilities of a Fed interest rate cut in 2020, and the market may continue to further lower the odds if Friday’s GDP and inflation numbers come in strong.
  • US Trade Representative Robert Lighthizer is wasting no time in turning his attention from China to Europe and said that the US may raise tariffs on European goods.  The comments didn’t do any favours for the euro this morning, which has already been hurt by the stronger dollar.  It is unclear when or if the tariff hike would be implemented, but another trade war isn’t going to be greeted with open arms by the EU,  whose economy has already been hit hard by global trade tensions.