Forex: Canadian CPI accelerates in March

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By S. Nicholas

The Canadian CPI data for March were released today, giving the highest reading since September 2008, to indicate that Canada’s inflation rate is on the rise. The Canadian Dollar climbed to a one-week high on the expectation that the Bank of Canada will resume raising interest rates soon.

The CPI Index jumped higher than the expected 2.8 percent to 3.3 percent on a year over year basis, compared to February’s 2.2 percent. Month over month, the rate also rose more than forecast to 1.1 percent versus the previous 0.3 percent.

Scotia Capital’s chief currency strategist Camilla Sutton said that “Inflationary pressure has begun to enter Canada and this will significantly change the market’s expectation of what the Bank of Canada will do in terms of interest rates.”

The Loonie gained 80 pips against the greenback after the release of the news to create a new one-week high during the US trading session. The USDCAD pair touched a low of 0.9547.