Semi truck traffic on Interstate 5 during a winter snow and freezing rain storm in Canada. Image source: Tracy Fox © 123RF.com
Canadian consumer prices in February grew slower than initially expected, owing, in part, to consolidating energy prices. Statistics Canada's latest inflationary report revealed that CPI increased by 0.5 per cent over the previous month.
The preliminary market forecasts were anticipating the index to pick up from January's 0.6 per cent expansion by reaching a growth rate of 0.7 per cent. Meanwhile, headline inflation reached 1.1 per cent.
Canada MoM CPI. Image source: TradingEconomics.com
The marginal drop in demand in February runs parallel to the weaker consumption in the U.S. that was recorded over the same period and is being influenced by common underlying factors. However, this is more likely to represent a temporary ripple as opposed to a drastic plunge, given the strong rebound in global demand.
This assertion is further substantiated by the fact that the weaker-than-anticipated inflationary data comes just days following the release of the robust employment numbers for the same month.
The strong performance of Canada's labour market signifies a very probable rebound in consumption in March, which, in turn, is likely to continue driving consumer prices towards BOC's longer-term inflationary goals.
This is why the Canadian dollar continues to project strength in the face of the somewhat uncertain greenback. As can be seen on the hourly chart below, the USDCAD still finds itself in a powerful downtrend.
The pair is currently consolidating just below the major support level at 1.24700, which is converging with the 50-day MA (in green). For as long as this behaviour continues to be in effect, the underlying bearish sentiment will prevail in spite of the seemingly rising bullish momentum. The latter can be inferred from the MACD indicator.
Nevertheless, a bullish pullback towards the major resistance level at 1.25300 is possible in the short-term, provided that the greenback manages to continue recuperating once again.
USDCAD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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