USD/CAD skidded lower to 1.0945 from 1.0960 after a quick whipsaw higher following the news on CPI and retail sales.
The good news was at the cash registers with sales ex-autos up 1.5% compared to 0.3%. Had the CPI report been high to go along with it, that would have been a dagger in the heart of those hoping for 1.10. But the inflation numbers were soft, especially core m/m prices falling 0.1% compared to +0.1% expected.
It’s understandable that the inflation numbers have been brushed aside. The BOC is “extremely” neutral, if that’s even possible. There’s no scope for any rate moves for at least a year and probably through 2015. In that case, investment flows and the strength of the domestic economy are larger drivers for the loonie.
In any case, I would be cautious reading too much into the latest moves. The real money is sidelines waiting for the air to clear around Yellen at Jackson Hole before getting involved and a stronger directional move might not come until next week.
