Canada publishes its inflation report for August and the Retail Sales publication for July on Friday, September 21st, at 12:30 GMT. There are no significant US publications at the same time, allowing the USD/CADto move solely on the Canadian figures. On the other hand, Canada’s reports can go in opposite directions, offsetting each other.

Canadian CPI

Inflation picked up in Canada back in July, with the headline Consumer Price Index rising from 2.5% to 3% year over year. Core CPI, which excludes volatile prices and is watched more closely by the Bank of Canada, rose from 1.3% to 1.6%.

The report for August is forecast to show more modest inflation. Headline CPI is projected to tick down to 2.9%. More importantly, Core CPI carries expectations for backtracking down to 1.4% YoY.

If both Core CPI YoY and CPI YoY meet expectations, the monthly changes will come into focus. Headline prices are predicted to slide by 0.1% after jumping by 0.5% last month. Core CPI rose by 0.2% MoM in July, and a similar figure is likely now.

BOC set to hike in October

The Bank of Canada convened in September and left the interest rate unchanged at 1.50% as broadly expected. The interest rate event did not consist of a press conference by Governor Stephen Poloz.

However, Senior Deputy Governor Carolyn Wilkins said that the BOC deliberated whether to accelerate the pace of rate hikes. The Ottawa-based institution considered removing the word “gradual” from the description of future rate increases. Her hawkish comments not only sent the Canadian Dollar higher but also raised expectations for a rate hike.

The inflation data is not expected to shine, but the bar is low for a rate hike as we learned from Wilkins. It would take a big disappointment such as a drop of Core CPI YoY closer to 1% to cause the BOC to doubt its moves.