Canadian headline consumer price inflation likely rose year-on-year in April

The Canadian headline consumer price inflation data for April is set to be released tomorrow. According to a TD Economics research report, the consumer price index is expected to have risen to 2.4 percent year-on-year, reflecting a 0.4 percent sequential rise, matching the seasonally adjusted rise. Driving the pickup is gasoline prices, which rose more than 7 percent in April, leaving overall energy prices a net positive. After running soft in the prior to two months, food prices are likely to have recovered, aided by a subdued CAD.

Stripping food and energy, price pressures are likely to have come in more moderate sequential rise after recording relatively solid gains in the prior three months. Healthcare is due for correction, while recreation/education might pullback on sporting equipment and travel services. Downward pressures should continue within the housing component of shelter, overpowering the rise from higher mortgages rates. Meanwhile, other one offs along with currency pass-through offer positive offsets, leaving pries up on balance in the exclusion based core indexes.

“We expect these indexes, which have been underperforming the BoC core measures, to rise modestly on a y/y basis”, stated TD Economics.

In the meantime, the average of the BoC measures, which stabilized at 2 percent in March, has more limited scope for further gains. With gasoline prices likely to increase into the summer, headline inflation is expected to continue to firm and reach 2.7 percent year-on-year in June, added TD Economics.

At 21:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bullish at 64.1408, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 73.4791. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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