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Domestic data gives the BoC scope to become less dovish – RBS

FXStreet (Barcelona) - The Research Team at RBS views headline and core CPI to remain close to Bank of Canada’s target, which will give the BoC scope to become incrementally less dovish in its December policy statement.

Key Quotes

“In Canada, CPI inflation for October is released. Domestic data in Canada, particularly employment, have picked up in the past few months. This pickup in domestic data and a still-solid pace of recovery in the US have both likely supported the CAD even as commodity prices have fallen.”

“Headline CPI may fall on an outright basis in October, largely on the back of seasonally adjusted energy prices. Still, on a y/y basis both headline and core CPI are anticipated to remain close to the Bank of Canada’s (BoC) 2.0% target.”

“These developments give the BoC scope to become incrementally less dovish at the December 3rd policy statement, particularly if inflation holds above the midpoint 2.0% target.”

“Still, we think the BoC will see the recent data more as a step in the right direction rather than proof that the economy is recovering faster than forecast.”

“Put another way, the Bank may use language noting they want further evidence of a sustainable recovery in employment and trade performance.”

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