There was choppy trading after the Canadian inflation data, although the consensus forecasts are that the Bank of Canada will cut interest rates again at next week’s policy meeting.
The Canadian dollar overall edged lower after the data with weaker oil prices also undermining currency support.
The Pound held a firm tone in global markets and the Pound to Canadian dollar (GBP/CAD) exchange rate advanced further to 40-month highs around 1.7735.
Canadian consumer prices declined 0.1% for June with the year-on-year inflation rate declining to 2.7% from 2.9% and compared with consensus forecasts of 2.8% while the core rate edged higher to 1.9% from 1.8%.
The Bank of Canada core readings overall were marginally lower on the month.
Stephen Brown, Deputy Chief North America Economist at Capital Economics commented; “The Bank of Canada’s preferred CPI-trim and CPI-median measures of core prices rose at an above-target monthly pace for the second month running in June.”
He added; “Nonetheless, with the Bank’s Business Outlook Survey, released yesterday, pointing to much more disinflationary pressure in the pipeline, we still think the odds favour another interest rate cut next week.”
Doug Porter, Chief Economist at BMO Capital Markets added; “I think combined with the weak employment number and the relatively soft business outlook survey this likely sets the stage for a rate cut next week.”
