Canadian Inflation Hits Near Two-Year High, but Core Pressures Ease

Summary:

Rising energy prices pushed Canada’s inflation rate to its highest level in nearly two years in April. However, softer core inflation kept overall data below market expectations, allowing the Bank of Canada to remain patient for now.

SELL USDCAD

EXP

TRADING

1.37531

Entry Price

1.34200

1.39800

1.37645 +0.00207 +0.15%

0.0

Pips

Flat

1.34200

Exit Price

1.37531

Entry Price

1.39800

Fundamentals

Data released Tuesday by Statistics Canada showed that Canada’s annual CPI rate rose to 2.8% in April, the highest level since May 2024, though still below market expectations of 3.1%.

The main driver behind the increase was higher energy prices. Amid persistent Middle East tensions, gasoline prices surged 28.6% year-over-year. In addition, Canada’s removal of the consumer carbon tax in April 2025 created a base effect that further amplified annual price gains.

However, core CPI excluding gasoline rose only 2%, suggesting that underlying inflation pressures have actually eased. This implies that despite a notable rise in headline inflation, the Bank of Canada still has room to remain patient and is unlikely to rush into further tightening.

Markets generally expect the Bank of Canada to keep rates steady while monitoring the pace of economic recovery in the second half of the year. If Canada’s real economy improves gradually over the coming months, the central bank may delay any further rate hikes until later this year. However, the rationale for tightening would likely shift toward economic recovery and stronger demand conditions rather than purely inflation concerns.

In contrast, with energy prices remaining elevated and Canada’s economy showing resilience, the Canadian dollar could continue to receive underlying support.

Canadian Inflation Hits Near Two-Year High, but Core Pressures Ease_1

Technical Analysis

USD/CAD remains neutral intraday and is currently rebounding from 1.3549. The current recovery is still viewed as a corrective move within the broader decline from 1.3480, suggesting that upside potential may remain limited.

On the downside, a break below the short-term support at 1.3597 would likely resume the broader downtrend and expose the 1.3420 region.

Trading Recommendation

Direction: Sell

Entry Price: 1.3835

Target Price: 1.3420

Stop Loss: 1.3980

Valid Until: 2026-06-19 23:55

Support Levels: 1.3713, 1.3628, 1.3584

Resistance Levels: 1.3878, 1.3930, 1.3967

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