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Event Guide: Canada’s CPI Report (August 2023)

September 18, 2023| Forex Market

Heads up, Loonie traders!

Canada is set to release a fresh batch of CPI readings soon, and these would likely impact BOC policy expectations.

What are number crunchers expecting and how might CAD pairs react?

Event in Focus:

Canada’s Consumer Price Index (CPI) and inflation data for August 2023

When Will it Be Released:

September 19, 2023 (Tuesday), 12:30 pm GMT

Use our Forex Market Hours tool to convert GMT to your local time zone.


  • Headline CPI m/m: 0.3% m/m forecast; 0.6% m/m previous
  • Headline CPI y/y: 3.9% y/y forecast; 3.3% y/y previous
  • Median CPI y/y: 4.0% y/y forecast; 3.7% y/y previous
  • Trimmed CPI y/y: 4.0% y/y forecast; 3.6% y/y previous
  • Core CPI y/y: 3.5% y/y forecast;  3.2% y/y previous
  • Expectations as of Sept. 18, 2:30 am GMT

Relevant Data Since Last Event/Data Release:

  • Average average hourly wages rose 4.9% y/y in August, down from the earlier 5.0% y/y gain in July
  • Capacity utilization rate slowed from 81.8% y/y to 81.4% in Q2 vs. estimated gain to 82.5%, reaching its lowest level since Q3 2020
  • Ivey PMI improved from 48.6 to 53.5 vs. 49.2 consensus in August, with prices index up from 65.1 to 66.7 to reflect stronger gains
  • S&P Global manufacturing PMI down from 49.6 to 48.0 in August, as production and new orders fell but “inflationary pressures picked up as firms throughout the supply chain continued to push higher operating expenses onto their clients.”

Previous Releases and Risk Environment Influence on CAD

August 15, 2023

Event results / Price Action: Canada’s July headline CPI came in stronger than expected at 0.6% m/m versus the projected 0.4% uptick and earlier 0.1% gain. The core version of the report came in line with estimates of a 0.5% increase.

However, the upbeat headline figures did not do the Loonie much favors, as broader market themes weighed on the commodity currency for the most part of the week.

Risk environment and intermarket behaviors: Risk-off flows remained in play throughout the trading week, as concerns about China’s growth and financial stability lifted demand for safe-havens.

As it turned out, Country Garden – China’s top private property developer – missed some bond payments AND suspended the trading of 11 of its onshore bonds.

In addition, the prospect of more interest rate hikes from the Fed also kept risk-taking in check, as traders remained wary of a potential recession.

July 18, 2023

Event results / Price Action: Canada’s June headline CPI fell short of estimates, as it came in at 2.8% year-over-year versus the 3.0% estimate and earlier 3.4% figure. The core reading also fell short at 3.2% year-over-year versus the 3.6% consensus.

After starting the week off in consolidation and an initial dip when the actual numbers were printed, the Loonie managed to get back on its feet and even end the week higher than majority of its peers, likely the result of traders pricing in the potential benefits of rising oil prices to Canada.

Risk environment and intermarket behaviors: Risk aversion was actually a prevailing theme for this trading week, but the Loonie managed to shrug off bearish vibes for higher-yielders.

Resurfacing geopolitical tensions in Ukraine and the possibility of rising global borrowing costs kept risk appetite in check early on, but the comdoll seemed to benefit from the PBOC‘s efforts to shore up Chinese economic activity.

Price action probabilities:

Risk sentiment probabilities: Market players could be on edge early in this trading week, as four major central banks are due to announce their policy decisions later on.

In particular, the FOMC statement and updated projections could hog the spotlight, so traders might not be keen on placing any large bets or holding on to their positions until the actual announcement.

Still, expectations of some degree of hawkishness from the Fed and the BOE may bring risk-off vibes, as the prospect of higher borrowing costs down the line could revive recession jitters.

Canadian dollar scenarios:

Potential Base Scenario:

Since the BOC decided to pause with their interest rate hikes in their latest statement, traders might be looking closely at the CPI reports to gauge if the Canadian central bank is likely to resume tightening anytime soon.

Leading indicators are looking mixed, although most are pointing to subdued inflationary pressures for August.

If so, the Loonie might be in for a quick selloff if the actual figures fall short of estimates, as these would imply that the BOC is likely to keep sitting on its hands.

In this scenario, watch out for intraday short CAD opportunities against lower-yielding currencies like JPY, CHF, and USD if risk aversion is observed early in the week.

Alternative Scenario:

Stronger than expected inflation data could be enough to convince some Loonie bulls that the BOC might resume tightening sooner rather than later. After all, the August PMI readings are pointing to a notable pickup in consumer inflation.

If that’s the case, be ready to look for long Loonie setups against currencies with more cautious central banks (ECB and RBA). There might also be long CAD opportunities against NZD, although moves might be limited ahead of the quarterly New Zealand GDP due Wednesday.

With either scenario, keep in mind that this week’s calendar is heavy with top tier catalysts from around the globe. It’s probably a good idea to stay on your toes this week and to adjust your risk management plans to a potentially choppy environment as traders are likely to shift their focus daily, barring any major surprise events that overshadows what’s currently on the calendar.

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