The Canadian Dollar (CAD) is marginally softer versus the US Dollar (USD) on the day, with a mild net loss on the session contrasting—once again—with moderate gains for the major currencies, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Losses held to low 1.38s ahead of CPI

"The CAD may get a little help from this morning’s CPI data. Canadian inflation is forecast to rise 0.3% in the July month, clipping the Y/Y headline rate of inflation down to 1.7% (from June’s 1.9%). Note that Scotia anticipates a 0.5% M/M rise which will keep inflation running at 1.9% in the year, bang on the Bank’s operational target."

"But the street sees no improvement in core inflation (both unchanged at 3.1% over the year) which is still a bit too toasty for the Bank to think about easing policy, given other uncertainties, at this point. September swaps have about 6bps of easing priced in, which still looks a bit rich. Firm data should lift short-term rates and the CAD modestly, at least."

"The CAD closed a little higher on the session yesterday against the USD in a technically positive development—striking an outside range (CAD bullish) reversal day on the chart. The range itself was hardly expansive but the signal should at least help reinforce—a little more—resistance in the low 1.38 zone. USD support is 1.3775 and 1.3550."