Prior to the release of Canada’s Consumer Price Index figures the ‘Loonie’ dropped against the US Dollar for the first time in recent days, while currency strategist Camilla Sutton commented: ‘Inflation in Canada is well contained. The overall bias is for a weaker Canadian Dollar today.’
The Canadian Dollar Exchange Rate was in the region of 0.9821 against the US Dollar as of 13:41 pm GMT
However, after declining steadily over recent months today’s CPI figures defied expectations, rising sharply in February.
In January CPI came in below the Bank of Canada’s target of 2 per cent for an eleventh month, but in February inflation rose to an unadjusted annual rate of 1.2 per cent, a significantly stronger figure than economists had forecast and the biggest gain for twenty years.
The last time prices rose by such a large amount was when Canada implemented a new sales tax in 1991.
On the year core inflation advanced 1.4 per cent, up from January’s 1.0 per cent increase.
The most significant contributor to the rise in the year-over-year figure was a 3.9 per cent jump in gasoline prices, following on from January’s decline of 1.8 per cent.
After the CPI report was released the ‘Loonie’ was able to rebound against the US Dollar, achieving its highest level for a month.
Last month current Bank of Canada Governor Mark Carney reasserted that as weaker-than-anticipated growth in the world’s 11th largest economy is keeping the inflation rate below target a rate boost isn’t a priority at the moment.
In response to the news market analyst Joe Manimbo stated: ‘The CPI number was above forecast. It does give it stronger tailwind to keep the Bank of Canada on track for an eventual rate increase.’
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