Canada releases July inflation today, ING's FX analyst Francesco Pesole notes.

Market pricing remains too conservative on BoC easing

"Expectations are for an acceleration to 0.3% MoM in headline, but a slowdown in YoY terms to 1.8%. The median and trim core measures are both expected at 3.1%. Prints close to these numbers would probably be consistent with the Bank of Canada resuming its rate cuts: not because inflation is too low now, but because of the lingering significant growth risks."

"Market pricing remains too conservative on BoC easing in our view. The CAD OIS curve only embeds 7bp and 15bp of easing for the September and October meetings, respectively. A rate cut is only fully priced in at the January meeting."

"We expect pressure on the BoC to cut coming both internally via deteriorating activity and labour market and externally as the Fed resumes cuts in September. We think the next move by the BoC can therefore come as early as October, if not September should data deteriorate."