Canadian inflation is expected to show an uptick in September, according to economists. The headline Consumer Price Index (CPI) is forecast to rise by 3.2% year-over-year and increase by 0.2% on a monthly basis, reversing the 0.1% contraction seen in August. The Bank of Canada’s (BoC) core measure, which excludes food and energy costs, is anticipated to remain steady at 2.4% year-over-year while also rising by 0.2% month-over-month.
The BoC’s preferred inflation gauges, CPI-Common, Trimmed Mean, and Median, cooled slightly in August to 2.6%, 1.9%, and 2%, respectively. Analysts attribute the expected inflation pick-up to persistent geopolitical tensions and rising crude oil prices, which are likely to sustain inflationary pressures. The BoC is set to announce its interest rate decision on October 28, with markets expecting rates to stay at 2.25%.
Governor Tiff Macklem has hinted at potential rate hikes if oil prices remain elevated or inflationary pressures spread beyond energy. Market participants are pricing in nearly 23 basis points of tightening by year-end. The Canadian Dollar has been volatile against the US Dollar, with USD/CAD navigating a downward path after hitting yearly highs near 1.4300 earlier this month.
Senior Analyst Pablo Piovano at FXStreet notes that USD/CAD remains above its critical 200-day simple moving average (SMA) at 1.3880, suggesting further gains are possible. Key resistance levels include the 2026 high at 1.4299 and the March 2025 peak at 1.4542. On the downside, support levels are at the 100-day and 55-day SMAs at 1.4035 and 1.4000, respectively. The Relative Strength Index (RSI) and Average Directional Index (ADX) indicate a strong upward trend.