Inflation rate in Canada remains stable.

The Canadian dollar has been consistently strong, reaching its peak since the beginning of August. This is due to the fact that while the underlying inflation rate has slightly increased, the overall inflation rate has remained stable. Investors anticipate that the Bank of Canada will likely continue its stringent monetary policy for a longer duration and may even raise interest rates further. This stands in contrast to the Federal Reserve, which has signaled a positive outlook for investors, indicating a potential 75 basis points interest rate reduction next year, resulting in the recent weakness of the US dollar.

Canada's inflation rate stands at 3.1% on an annual basis as of November, remaining stable compared to the previous month and higher than the market's expectation of 2.9%. This increased inflation is attributed to higher mortgage interest costs, which rose by 29.8% due to the Bank of Canada's interest rate hikes. Despite a decline in residential property prices, the decrease in oil prices hasn't significantly impacted Canada as it's not a major imported commodity.

The Bank of Canada has forecasted that inflation could rise further to nearly 3.5% by mid-next year. Policymakers suggest that another interest rate hike might be necessary to curb the continuously increasing inflation caused by price fluctuations.

The Canadian raw materials price index dropped by 4.2% on a monthly basis in November, mainly due to a 10.3% decrease in energy prices, the most significant decline in production costs. This resulted in a 0.4% decline in the producer price index on a monthly basis. Meanwhile, pork prices fell by 5.7% due to sufficient supply and decreasing demand. However, the prices of metallic minerals increased slightly.

Foreign investors reduced their investments in Canadian securities by up to $15.75 billion in October, marking the largest divestment since March, reflecting a shift in asset allocation due to Canada's contracting economic data. The primary reason was a reduction in private-sector debt security investments, down by $17.3 billion. Additionally, holdings in stocks and mutual funds decreased by $2.01 billion. Simultaneously, Canadian investors reduced their holdings in foreign securities by $8.2 billion, mostly in US stocks.

Canada's 10-year government bond yield decreased to below 3.14%, supported by expectations of the Federal Reserve initiating interest rate cuts next year. Additionally, Canada's inflation rate remains at 3.1%, indicating a sustained upward trend in the short term.

Techical analysis data (5H)

Resistance: 1.3355, 1.3368, 1.3376

Support: 1.3334, 1.3326, 1.3313

Source: Investing.com