As widely expected, majority of the inflation metrics in Canada’s July CPI report reflected cooling price pressures for the month.
While the headline CPI showed a 0.4% month-on-month rebound as expected, the annual reading slipped from a 2.7% year-over-year increase in June to just 2.5% in July – its lowest reading since March 2021.
The core CPI reflected a 0.3% monthly uptick, but annual core inflation dipped from 1.9% to 1.7% instead of holding steady. Other inflation-related metrics such as the trimmed CPI and median CPI also indicated softer year-on-year gains:
- Headline monthly CPI: 0.4% (0.4% expected, -0.1% previous)
- Headline annual CPI: 2.5% (2.7% expected, 2.7% previous)
- Core monthly CPI: 0.3% (0.1% expected, -0.1% previous)
- Core annual CPI: 1.7% (1.9% expected, 1.7% previous)
- Trimmed CPI: 2.7% y/y (2.8% expected, previous reading downgraded from 2.9% to 2.8%)
- Median CPI: 2.4% y/y (2.5% expected, 2.6% previous)
- Common CPI: 2.2% y/y (2.2% expected, 2.2% previous)
Link to Canada’s Consumer Price Index Report (July 2024)
Components of the report revealed that the decline in overall inflation was broad-based, led by lower prices for travel tours, passenger vehicles and electricity.
Market Reactions
Canadian Dollar vs. Major Currencies: 5-min
Overlay of CAD vs. Major Currencies Chart by TradingView
The Loonie, which had mostly been cruising sideways ahead of the Canadian CPI release, turned lower upon seeing the year-on-year readings come in the red.
It continued to edge lower, most notably against the lower-yielding yen and franc, as risk-off flows had been in play, before leveling off against the rest of its counterparts around a couple of hours after the report. CAD remained on wobbly footing against its fellow commodity currencies for the remainder of the session but managed to keep its head above water versus the dollar.