All eyes are on Monday’s inflation data as Statistics Canada releases October’s CPI report, offering policymakers at the Bank of Canada (BoC) a crucial update ahead of the December 10 meeting. Markets expect the bank to hold its benchmark rate at 2.25%, keeping policy steady as officials assess the trajectory of price pressures.
Economists now forecast headline CPI to rise 2.1% YoY in October, easing from September’s 2.4% pace and aligning more closely with the BoC’s inflation target. On a monthly basis, inflation is expected to increase 0.2%. The bank’s preferred core gauge—which rose 2.8% YoY in September after 2.6% in August—will remain front and centre as policymakers evaluate whether inflation is truly cooling.
Last month’s uptick in inflation has kept analysts on edge, particularly amid uncertainty about how US tariffs could feed into domestic prices in the months ahead. For now, both markets and the BoC appear inclined to tread carefully.
What to expect from Canada’s inflation path
The BoC delivered a widely anticipated 25 bp cut in October, trimming the policy rate to 2.25%. At that meeting, Governor Tiff Macklem struck a measured tone, noting policy is now providing “some stimulus” as the economy slows.
While he acknowledged that consumption is likely to moderate, he emphasized that one soft economic print won’t alter the bank’s broader outlook. Even so, he did not rule out the possibility of two negative quarters. He also flagged stretched equity valuations, underscoring simmering financial-stability concerns.
Senior Deputy Governor Carolyn Rogers echoed that caution, highlighting the Canadian Dollar’s role as a shock absorber and pointing to growing regional disparities within the housing market. Both officials stressed that financial-stability risks are back in focus.
For markets, the headline CPI figure will dominate initial reactions. But within the BoC, attention will be trained on the Trimmed, Median, and Common core measures. The first two remain above 3%, a level that continues to trouble policymakers, while the Common measure has also edged higher—still comfortably above target.
When is the CPI release, and what could it mean for USD/CAD?
Statistics Canada will publish October CPI at 13:30 GMT on Monday. Traders remain alert to the risk that inflation stays sticky, reinforcing ongoing upward pressure on prices.
A hotter-than-expected reading would raise concerns that tariff-related cost pressures are filtering through to consumers. Such an outcome could push the BoC toward a more cautious stance in the near term while offering the Canadian Dollar (CAD) some short-lived support as investors recalibrate expectations around the bank’s easing path.
Pablo Piovano, Senior Analyst at FXStreet, notes that the CAD has strengthened from earlier monthly lows, pulling USD/CAD back toward the key 1.4000 region. He adds that upside momentum remains intact while the pair trades above the 200-day SMA near 1.3930.
According to Piovano, renewed bullish momentum could propel USD/CAD toward resistance at 1.4140 (November 5), followed by the April peak at 1.4414 (April 1).
On the downside, he highlights initial support at the 200-day SMA around 1.3929, with further demand seen at the October low of 1.3887 (October 29).
A loss of this zone could trigger a deeper pullback toward the September trough at 1.3726 (September 17), followed by the July low at 1.3556 (July 3).
Piovano also points to constructive momentum signals: the RSI is holding near 53, while the ADX is easing toward 25, indicating a trend that remains firm despite recent consolidation.
This story was updated on November 17 at 10:46 GMT to reflect changes in the consensus, which now expects headline CPI to rise 2.1% YoY and 0.2% MoM in October, rather than 2.3% and 0.1% as previously estimated.
