CAD Faces Near-Term Risks from Data, Tariffs, and BoC Expectations

The Canadian dollar is facing near-term risks due to upcoming economic data and potential US tariffs. TD Securities' analysts, Robert Both and Emma Lawrence, highlight that markets are watching for Canadian CPI and possible Section 338 tariffs on CAD exports.

The analysts expect headline CPI at 2.9% year-on-year in July with core at 1.85%. They also forecast retail sales to be flat in June, following a modest increase.

The Bank of Canada is projected to hold its Overnight Rate at 2.25% through 2026 before gradual hikes in 2027. The analysts believe that the recent data will allow the Bank to stick to its messaging at the next policy decision on September 2nd, assuming core CPI stays stable.