Loonie Strengthens, CPI As Expected - 20.4.2012

The Canadian dollar was trading stronger today against the greenback. There was no surprise on the Core Consumer Price Index report and the inflation in Canada seems contained. The Bank of Canada in their last Monetary Policy Report said that “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation”. Since inflation remains in low levels, a Canadian overnight rate hike is a less possible scenario in the next BOC meeting.

The Core CPI m/m which excludes the 8 most volatile items was reported today at 0.3 per cent as forecasted and 0.1 per cent lower than the previous figure. The Consumer Price Index, including all services and goods was at 0.4 per cent, 0.1 per cent lower than the forecast and at the same level as the previous figure. In general the average price of goods and services rose in January 2012 and then kept a steady pace. At the same time a composite of leading indices was released for the Canadian economy announced lower than expected at 0.4 per cent, though it kept a positive rate it has been diminishing the last 3 months.

The US dollar against the Canadian found key resistance at the 0.9960 level and then head to lower levels. The pair is trading below the 20 and 10 Moving Averages and there was a negative cross formatted by MAs. At the moment the support level at 0.9903 holds the negative momentum.