An unexpected downtick in the November Canadian CPI inflation has reinforced expectations for more modest rate cuts by the Bank of Canada. The slowdown in Canadian CPI inflation in November has fuelled expectations of further rate cuts in 2025, though the era of large cuts may be over. This could weigh on the Canadian Dollar and benefit the USD/CAD pair.
Data to Watch
Traders will be closely watching the Canadian October Retail Sales and US Core Personal Consumption Expenditures (PCE) Price Index data, which are due later on Friday.
Analyst’s View
Rachel Siu, head of Canadian fixed income strategy at BlackRock, said, “Overall, the November inflation report was mixed—while headline CPI eased to 1.9% year over year, core measures showed some stickiness. We continue to expect the Bank of Canada to trim policy rates by 25 basis points in January and shift toward a more gradual approach to cutting rates in 2025.”
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