Canadian Dollar: Softer CPI trims BoC hike odds – Deutsche Bank

Deutsche Bank highlights that weaker‑than‑expected Canadian CPI reduced the perceived need for near‑term Bank of Canada tightening. Headline inflation undershot consensus and both key core measures fell, pushing the implied probability of a July rate hike down to 24% and weighing on front‑end yields, with the 2‑year Canada yield declining despite global yield pressures.

Dovish inflation print eases pressure

"Over in Canada, the latest CPI print also came in on the dovish side, which led investors to dial back the chance of an imminent rate hike."

"That showed headline CPI only rising to +2.8% in April (vs. +3.1% expected)."

"Moreover, both of the core measures followed by the Bank of Canada actually fell, with median core down to +2.1% (vs. +2.3% expected), and trim core down to +2.0% (vs. +2.2% expected)."

"So the probability of a rate hike by July fell to just 24%, and in turn that put downward pressure on Canada’s front-end yields."

"For instance, the 2yr yield (-2.1bps) fell to 3.03%, despite the global moves elsewhere."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)