Recovery of Canadian Dollar as Markets Anticipate US Inflation and Fed Rate Forecast

• The Canadian Dollar (CAD) gained momentum on Monday, soaring in the market.
• Canadian economic data may be scarce this week, but BoC Gov Macklem will make an appearance on Friday.
• This week, the US CPI inflation, Fed rate call and interest rate outlook will be the linchpin for markets.

The Canadian Dollar (CAD) made a strong move on Monday, rising against most major currency peers as the market braces for a busy week with central bank events shaping the trading landscape as the year comes to a close.

Canada’s economic calendar is relatively light this week, with minimal data scheduled for Thursday and Friday. The highlight will be Bank of Canada (BoC) Governor Tiff Macklem’s appearance at the Economic Club of Toronto on Friday. The speech will be released fifteen minutes ahead of time.

This trading week will be focused on central bank activity, with the US Consumer Price Index (CPI) inflation data released on Tuesday being a key event. The US Federal Reserve (Fed) will announce its latest rate decision on Wednesday, with expectations leaning towards a hold at 5.25% to 5.5%.

The US Federal Open Market Committee (FOMC) is set to release its updated economic projections alongside its policy statement, and investors will be closely watching for any changes to the FOMC’s forward-looking interest rate projections, known as the “Dot Plot”. The Fed’s Monetary Policy Statement and rate call are scheduled for 19:00 GMT on Wednesday, followed by the FOMC Press Conference at 19:30 GMT.

Daily Digest Market Movers: Canadian Dollar steps higher across the board in thin Monday action

• The Canadian Dollar is in the green to kick off the new trading week, climbing a full percent against the Japanese Yen (JPY). 
• The CAD is hardening gains against the Aussie, up one-third of a percent against the Antipodean.
• The CAD’s weakest performance on Monday is still on the measured side, shedding a scant half of a tenth of a percent against the Swiss Franc (CHF) and climbing a tenth of a percent against the US Dollar (USD) in Monday trading.
• The broader market’s key focus in the early week will be US inflation data with Tuesday’s CPI release.
• Market forecasts call for Core US CPI to climb at the near end of the tail with annualized inflation expected to hold steady.
• Headline MoM US CPI inflation is forecast to tick up from 0.0% to 0.1% for November, with the YoY expected to tick down from 3.2% to 3.1%.
• November’s Core US CPI is forecast to print at 0.3% versus October’s 0.2%, with consumer price growth (less food and energy prices) expected to hold flat at 4% for the year into November, still well above the Fed’s 2% target.

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