EUR/USD has run some small stops as it breaks through 1.2700. The buck in general is seeing some positional adjustment as we head towards the inflation data at 12.30 gmt. USD/JPY isn’t really reacting though as it sits at 106.93.

The market is expecting headline CPI to fall to 1.6% y/y from 1.7% but the core to remain unchanged at 1.7% y/y. On the monthly numbers CPI is expected in flat vs -02% in August and up 0.2% vs flat in the core.

Again we might be a bit behind seeing the oil price drop reflected in the numbers as we spent most of September between $90/95. If we get lower inflation we’ll need to watch the components to see where any pressures are. If they are more from domestic price falls, then the rat brigade are going to feel justified to push back expectations and that’s likely to send the buck lower across the board. If inflation pushes higher then that might catch a few traders on the hop and we’ll see a pop in the dollar.

My usual gauge is to look for a 0.2%+/- variation in the figures to see a bigger move in currencies. Inside of that I probably wouldn’t look to chase a direction but use it to trade off any levels you were waiting for.

Also up is Canadian retail sales which are expected in at flat vs -0.1% m/m (+0.2% vs -0.6% ex-autos). While the BOC is due to continue to sit on the fence at their monetary policy meeting later, a strong number may sway some loonie traders into adjusting their expectations. Again, it will take a big swing in the numbers to garner a decent move in the currency. We’re probably talking a 1% +/- variation in what can be a volatile data point.

Adam had a great preview of the BOC announcement here