Canadian inflation data is today’s key release, with headline CPI expected at 1.9% yoy in July, unchanged from June. More attention may fall on core measures, with CPI common forecast to tick up to 2.7% yoy from 2.6% yoy. The figures arrive at a delicate juncture for BoC, which has cut rates seven times since June 2024 but held steady at 2.75% in its last three meetings.
Expectations for a September rate cut remain divided. The BoC’s July summary of deliberations revealed a split council: some members argued that enough easing has already been delivered, while others highlighted economic slack and warned further support may be needed if labor market conditions soften. The uncertainty has left markets reluctant to price in an imminent move with conviction.
Tariff risks complicate the picture. Policymakers noted in July that U.S. tariffs and the rewiring of global trade are directly influencing inflation and broader growth dynamics. The latest decision to hold rates came just before Trump ratcheted Canadian tariffs up to 35%, though with exemptions for CUSMA-compliant goods.
Despite headwinds, BoC acknowledged some resilience in the domestic economy. Yet policymakers remain wary of timing: additional easing might only take hold as demand begins to recover, raising the risk of fueling price pressures rather than cushioning growth.
For now, inflation remains close to target and the economy has shown pockets of resilience, but the balance of risks is still fragile. Whether today’s CPI confirms contained price growth or points to renewed pressures could influence whether BoC holds steady again in September.
Technically, EUR/CAD is starting to lose momentum as it’s struggling to sustain above 1.6151 key resistance (2018 high). Immediate focus is on 1.6063 minor support. Firm break there will indicate short term topping and bring deeper pullback to 55 D EMA (now at 1.5910).
But the overall outlook will stay bullish as long as 1.5764 support holds. The larger up trend is expected to resume sooner or later. Once the 1.6151 resistance is cleared decisively, next target is 61.8% projection of 1.4682 to 1.5959 from 1.5598 at 1.6387.
