Canadian Dollar Rallies on Improved Inflation Despite BoC Warning

Talking Points:

• Canadian inflation retouches a 23-month high in March
• BoC warns that inflation rise is transitory
• Canadian Dollar rallies 25 pips against the US Dollar

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The Canadian Dollar rallied in Forex markets, as consumer prices were reported to have risen more than expected in March. The annual inflation rate retouched the 23-month high at 1.5%.

The Loonie rally on the improved inflation data may have surprised Forex traders after the Bank of Canada said yesterday that higher inflation this year is only transitory and the 2% inflation target is unlikely to be met until 2016. The BoC left its target interest rate at 1% yesterday and maintained a neutral tone on the rate change. However, continually higher inflation may prompt the BoC to tighten policy sooner than expected.

USD/CAD 1-Minute: April 17, 2014

USD/CAD fell 25 pips to a daily low at 1.0983 following the release of the inflation data, but support may continue to be provided by the key 1.1000 level. Currency Strategist Ilya Spivak says a USD/CAD close above resistance at 1.1017 may expose another 100 pips of upside momentum.

Chart created by Baruch Spier using Marketscope 2.0. Add DailyFX Support/Resistance to your charts at FXCM Apps.

-- Written by Baruch Spier, DailyFX Research. Feedback can be sent to [email protected] .

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