Canadian inflation to have eased significantly in November, may fall further in December on lower oil prices

Canadian inflation data for the month of November is set to be released tomorrow. According to a TD Economics research report, inflation is likely to have moderated considerably to 1.7 percent from October’s 2.4 percent. Energy prices are expected to have mainly driven the slowdown, with gasoline prices falling 10 percent sequentially on the oil rout. This pushes the energy component into deflationary territory.

Food prices are expected to have provided a partial offset but beyond that the picture is not positive. Excluding food and energy, the index is expected to have slid below 2 percent, partly reflecting mean reversion from the strength in October. Furthermore, travel services and airfares are expected to have eased too, which tilts risks to the downside. The recent currency deprecation is a net tailwind but a marked lift is unlikely to materialize until next month.

“Looking ahead, headline CPI should fall further in December on the back of lower oil prices, leaving inflation tracking below BoC’s forecasts at 2.0 percent in Q4 (BoC: 2.3 percent)”, added TD Economics.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -92.8734, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -81.9156. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex