Canadian Dollar: Data and tariffs shape near-term risks – TD Securities
TD Securities’ Robert Both and Emma Lawrence highlight that markets are watching Canadian CPI and potential US Section 338 tariffs on CAD exports. They expect headline CPI at 2.9% year-on-year in July with core at 1.85%, and see retail sales flat in June.
Canadian monetary authorities and traders are closely monitoring inflation data and potential tariffs from the United States, which could impact the Canadian dollar's near-term outlook according to TD Securities. Expected Canadian CPI for July is 2.9% year-on-year, with core CPI at 1.85%, while retail sales data showed flat growth in June.
The Bank of Canada has maintained its overnight interest rate at 2.25% through 2026, with potential hikes in 2027. The focus is on top-tier economic releases and the deadline for the Section 338 tariffs, which would impose a 50% tariff on $20 billion worth of Canadian exports to the United States. Negotiations between Canadian and US officials aim to find an off-ramp for the tariffs.
The forecast suggests a 0.1 percentage point increase in headline CPI to 2.9% year-on-year, driven by rising food and energy prices. Core CPI is expected to stay below Bank of Canada's projections, allowing the Bank to keep interest rates steady until September 2nd. The Bank of Canada is forecasted to maintain its 2.25% rate through 2026 before increasing to 2.75% next year, with further hikes in January and March 2027.
Retail sales are expected to remain stable in June, with stronger motor vehicle sales providing support, but gasoline price declines could negatively impact the ex-autos measure. The Canadian dollar's performance is closely tied to inflation data and potential US tariffs.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
