CAD underperforms again - Scotiabank

The Canadian Dollar (CAD) is marginally softer versus the US Dollar (USD) on the day, with a mild net loss on the session contrasting--once again--with moderate gains for the major currencies, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Losses held to low 1.38s ahead of CPI

"The CAD may get a little help from this morning's CPI data. Canadian inflation is forecast to rise 0.3% in the July month, clipping the Y/Y headline rate of inflation down to 1.7% (from June's 1.9%). Note that Scotia anticipates a 0.5% M/M rise which will keep inflation running at 1.9% in the year, bang on the Bank's operational target."

"But the street sees no improvement in core inflation (both unchanged at 3.1% over the year) which is still a bit too toasty for the Bank to think about easing policy, given other uncertainties, at this point. September swaps have about 6bps of easing priced in, which still looks a bit rich. Firm data should lift short-term rates and the CAD modestly, at least."

"The CAD closed a little higher on the session yesterday against the USD in a technically positive development--striking an outside range (CAD bullish) reversal day on the chart. The range itself was hardly expansive but the signal should at least help reinforce--a little more--resistance in the low 1.38 zone. USD support is 1.3775 and 1.3550."