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Canada CPI set to return focus as inflation risks linger

Economists expect headline CPI to rise 2.9% year over year in July, with core inflation seen at 2.2%, after the Bank of Canada held rates at 2.25% last month.

Reported · Written up by our desk · Major Pairs

Canada’s July Consumer Price Index will be the focus for FX traders after Statistics Canada publishes the inflation data on Monday, with markets looking for clues on whether price pressures are keeping pace following the Bank of Canada’s July 15 decision.

FXStreet said the BoC held its policy rate steady at 2.25% and that July pricing is expected to show headline CPI rising 2.9% year over year, up from June’s 2.8%, while monthly inflation is projected to increase 0.7%. The central bank is also expected to monitor core measures that strip out food and energy costs, with core CPI forecast to rise 2.2% year over year, up from 2.1% in June.

FXStreet noted that crude oil dynamics and the effect of US tariffs could keep inflationary pressures elevated, even as some of the CPI gauges cooled in June. It added that the BoC left its preferred measures, including CPI-Common, Trimmed Mean, and Median, lower in June, but market participants remain skeptical about whether that slowdown will persist into July.

On the currency side, FXStreet highlighted that USD/CAD has been in a steady downtrend since late July, largely tracking developments tied to Middle East conflicts, and said the pair has recently broken below the 1.3900 support level for the first time since early June. FXStreet also pointed to the move leaving the pair below its provisional 100-day simple moving average near 1.3920, setting up renewed attention to how Monday’s CPI print could shift rate expectations for the Canadian dollar.

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