Fall in oil outweighs hot CPI as Canadian dollar slumps

<p>The Bank of Canada got its final look at inflation data today ahead of the September 6 rate-setting meeting. Prices rose a surprising 0.6% in the month compared to 0.3% expected and core prices rose 0.5% m/m. </p><p>That number has helped to boost the implied hike odds at the upcoming meeting to 30%, with a full hike priced in by next March. I <a href="https://www.forexlive.com/news/the-canadian-economy-has-hit-the-economic-wall-expect-canadian-dollar-weakness-to-follow-20230814/" target="_blank" rel="follow">wrote yesterday</a> why I expect USD/CAD to rise to 1.40 and if the Bank of Canada does hike in September, it would be a big mistake that would only add to the case for a recession later.</p><p>For today, the high CPI reading has been balanced by a decline in oil prices. WTI crude oil is down $2.05 to $80.46 today on worries about China after poor data today on industrial production and retail sales. A decline this week would break a 7-week streak of gains in crude.</p><p>As for USD/CAD, the overall moves aren't large today with the pair up just 15 pips. Risk aversion is high today but the US dollar is retracing as yields fall on a flight to safety.</p>

This article was written by Adam Button at www.forexlive.com.