Canadian Dollar extends rebound on upshot CPI print

• The Canadian Dollar gained another 0.3% on Tuesday.
• Canada saw a higher-than-expected CPI inflation print for October.
• A reacceleration of inflation is sparking hopes for further BoC rate cuts.

The Canadian Dollar (CAD) caught a bid on Tuesday, rising for a second straight day against the Greenback after Canadian Consumer Price Index (CPI) inflation rose again in October. The CAD is burning rubber against the US Dollar, recovering a full percentage point with further gains in the scope as the Loonie claws back ground after hitting 54-month lows near 1.4100.

Canada's entire basket of CPI inflation figures swept forecasts on Tuesday, printing higher across the board and set to test the Bank of Canada's (BoC) resolve on interest rates. The figures are still on the low side of recent history; headline annualized CPI hit a three-year low just last month. However the rebound in figures will still serve as a shot across the bow of the BoC, which is already on a path of accelerating rate cuts as the Canadian economy waffles in the post-pandemic environment.

Daily digest market movers: Canadian Dollar scrambles back from the brink

• The Canadian Dollar added back another third of a percent on Tuesday, dragging bids decisively back below the 1.4000 handle on the USD/CAD chart.
• Headline Canadian CPI inflation accelerated to 2% YoY in October, accelerating from the previous three-year low of 1.6% and outpacing the forecast of 1.9%.
• The BoC's core CPI inflation measure also accelerated on an annualized basis, coming in at 1.7% YoY versus the previous period's 1.6%.
• Headline CPI inflation rose to 0.4% MoM in October after September's -0.4% contraction. Median market forecasts called for a 0.3% print.
• Except for Retail Sales figures due on Friday, Canada is functionally done with impactful releases for this week.

Canadian Dollar price forecast

The Canadian Dollar (CAD) extended a near-term recovery into a second day, clawing back from the cliff edge after hitting 54-month lows late last week. The USD/CAD chart has slid back below the 1.4000 handle amid the Loonie's rebound, easing back a full percent from nearly five-year highs just north of 1.4100.

Despite the near-term recovery, it's still far too early to declare a turnaround underway. USD/CAD price action is still grinding out chart paper well above the 50-day Exponential Moving Average (EMA), though CAD bulls will be invigorated as the pair appears set to continue bouncing around a multi-year sideways trend on the higher timeframes.

USD/CAD daily chart