Canadian Inflation Pushes Loonie to New Highs

The Canadian dollar rose today, touching the highest level in a month against its US counterpart, as Canada’s inflation exceeded expectations. The currency also rallied to the strongest level in a year versus the euro and reached a new multi-year high against the Japanese yen.

The Canadian Consumer Price Index rose 0.1 percent in October from September on a seasonally adjusted basis while economists expected a drop. The core CPI was up 0.2 percent (seasonally adjusted) last month, at same rate as in September and August.

The positive data led to speculations that the Bank of Canada will start raising interest rates sooner. Indeed, the central bank did not mention “neutral” stance of policy going forward in the statement of its last policy meeting. Analysts think the change to the language suggests that Canadian policy makers are less dovish than they have been before. It is unlikely that the BoC will tighten monetary policy sooner than the Federal Reserve, but the current policy outlook is supportive for the Canadian currency nonetheless.

USD/CAD went down from 1.1303 to 1.1238 as of 20:23 GMT today while its daily low of 1.1190 was the lowest since October 31. EUR/CAD sank from 1.4174 to 1.3920, trading near the weakest level since November 7, 2013. CAD/JPY rallied from 104.51 to 104.73, touching the maximum of 105.31 intraday — the strongest rate since August 2008.

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