Canada CPI accelerated to a 2.1% y/y rate in January from the 1.5% pace in December, surging past expectations. CPI grew 0.9% m/m in January after falling 0.2% m/m in December. While the pick-up in the total CPI outpaced projections for a less dramatic acceleration in the annual and monthly growth rates, the source of the gain was as-expected: a sizable pick-up in gasoline prices. The CPI’s gasoline price index surged 20.6% y/y, which was the strongest gains since January of 2011. When gasoline prices are removed, the CPI improved to a more sedate 1.5% y/y pace in January from 1.4% in December. The trio of core CPI measures were mixed in terms of movement. CPI trim grew 1.7% y/y in January after the 1.6% pace in December. CPI-median expanded at a 1.9% y/y clip, identical to the 1.9% pace in December. The CPI- common slowed to a 1.3% y/y pace from 1.4% y/y. Hence, the Bank will look through the temporary boost to total CPI due to gasoline prices, as measures of underlying inflation remain consistent with an environment of ongoing spare capacity.
AUSCAD fell on the CPI news to break 1.007 to trade as low as 1.0028. On the daily chart had a sudden and rapid “about turn “following the Canadian data, falling from Wednesday’s highs of 1.0157. It is currently trade south of the 30 and 50 period moving averages in a 4 hours’ chart, while MACD is still positive. On the hourly chart, the 200 period EMA has been broken earlier. Also, the 38.6 Fibonacci level has been broken and even that might prompt further weakness, however RSI is at the oversold zone, which might suggest a possible reversal on the particular pair.
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