The consensus is for the Canadian CPI to have returned below 2.0% in September for the first time since March 2021, sid Societe Generale.
Canada will release CPI for September at 8:30 a.m. ET Tuesday.
Money markets are pricing a 39bps cut by the Bank of Canada next week, but a soft inflation print on Tuesday could nudge the curve toward 50bps, stated SocGen.
Not an ideal scenario for the Canadian dollar (CAD or loonie) and a potential recipe for further frustration after a brief respite from oversold levels last Friday, wrote the bank in a note to clients. USD/CAD is up three big figures already this month.
An overshoot towards 1.39 is on the cards for the sixth time since 2022, pointed out SocGen. The 1.40 area hasn't traded since the COVID-19 pandemic in 2020. CFTC positioning data showed no let-up in bearish CAD views, hoisting shorts to almost 40% of OI.
The gap with the Australian dollar (AUD) ballooned as a result to a "startling" 56ppt, added the bank. It's an indication of how investors are positioned and are playing the Reserve Bank of Australia/BoC spread, according to SocGen.
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