Canada’s Inflation Surprise

Canadian producer prices rose more than expected in July, reviving concerns that the active phase of the fight against inflation may not be over.

The Producer Price Index rose 0.4% in July, more than the 0.2% expected. The year-on-year decline slowed from 5.5% to 2.7%. The raw materials price index surprised even more, rising 3.5% m/m versus 2.1% expected. The annual rate of decline fell from 20.2% to 11.1%.

The deflationary impact of the commodity price correction in Canada is fading faster than expected. And this could be a trend for the US as well.

The USDCAD has gained 2.8% since the beginning of August, gaining on all but one day. This has returned the pair above 1.3650, its highest level since early June. The pair’s five-week rally has created a short-term overbought bias, but the longer-term trend remains bullish.

The FxPro Analyst Team