The Canadian dollar roller-coaster will continue with CPI

Monday was a roller-coaster for Canadian dollar traders as the loonie jumped to a one-month high at the start of the day on a report that Trump wouldn’t announce any tariffs on Day 1. Instead, he issued a memo asking to study trade deficits, including against Canada.

That flipped late in the day (early in Tuesday’s Asian FX trade) when he said:

“We are thinking in terms of 25 per cent on Mexico and Canada because
they are allowing vast number of people, Canada is a very bad abuser
also, vast numbers of people to come in and fentanyl to come in,” he
told reporters.

That sent USD/CAD to 1.4515, which is a cycle high but it’s since slipped to 1.4445.

With that kind of threat, the Bank of Canada is more-likely to cut rates on January 29. The market is currently pricing in an 80% chance.

That will swing further on CPI data due at the bottom of the hour. The consensus is a benign -0.4% m/m reading a +1.9% y/y reading.

This article was written by Adam Button at www.forexlive.com.