Canadian consumer price inflation likely accelerated in July, says TD Economics

Canadian consumer price inflation is expected to have accelerated in July. According to a TD Economics research report, the CPI figures is likely to have inched higher to 1.1 percent year-on-year from June’s 1 percent, reflecting a 0.1 percent drop in prices on the month. Energy prices are expected to have declined on the month, led by lower gasoline prices; however, this impact should be neutral on a year-ago basis. Additional gains in food prices are expected, consistent with past rises in agricultural prices though currency appreciation poses a downside risk in the coming months.

Other sources of strength in July include shelter costs on the back of the acceleration in new housing prices and increasing mortgage rates. Even if underlying measures of inflation are bottoming, the risks seem to be tilted to the downside because of lagged effects of economic slack, renewed currency appreciation and other sources of temporary softness.

“The three core metrics of inflation (CPI common, trimmed mean and median) averaged 1.40% y/y in June and will likely once again drive the market reaction, with some stabilization or pickup to the benefit of rate hike expectations”, stated TD Economics.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -86.6311, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 35.8103. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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