Summary:

• Canadian inflation in November picks up
• Retail sales also come in better than expected
• Canadian dollar rising across the board

Whilst the US data release may have stolen the headlines this afternoon, the economic figures from Canada are perhaps the bigger surprise. First off, inflation seems to have picked up with the CPI M/M increasing to 0.3% from 0.1% previously – higher than the 0.2% expected. The Y/Y reading rose to 2.1% moving above the 2.0% target.

Whilst the rise in the headline inflation figure is strong it is worth looking at the other metrics published to try an ascertain the “core” reading. There are 3 core CPI measures now used by Statistics Canada and 2 of these were better than forecast and contributed to a rise in an average of the 3. 

 Canadian inflation is now above target and the rise in core measures also supports the concept of a more inflationary environment. Source: XTB Macrobond

Consumer spending in Canada also is picking up and supportive of the Canadian dollar. The figures for October show a 1.5% rise M/M compared to a +0.3% expected and a 0.1% prior. The core reading is also impressive coming in at 0.8% compared to 0.3% previously and 0.4% expected. 

 Retail sales for Canada continue to impress and they remain close to their highest levels of the decade. Source: XTB Macrobond

 The combination of the US data missing forecasts and the Canadian exceeding has seen a large move in USDCD with the pair tumbling some 80 pips in the 5 minutes following the release. 

 USDCAD fell sharply following the release of the data. Source: xStation

The market remains in the range from around 1.2680 to 1.2915 that has defined price for the past 2 months. On Tuesday price attempted to move out to the upside but a failure there has seen the market come back under pressure. 

 USDCAD is moving towards the lower bound of its range from 1.2680-1.2915. Source: xStation