Canadian inflation figures for July are due this afternoon, Commerzbank FX Analyst Michael Pfister notes.

CAD set to remain under pressure

“Anything other than a decline in the year-on-year rate for the headline rate would probably be a big surprise. After all, the last two major base effects will be removed from the calculation of the year-on-year rate in the next two months.”

“So, unless we see a surprise rise in the seasonally adjusted monthly rate of change - and the figures for recent months give little indication of such a rise - the year-on-year rate is likely to take the penultimate major step towards the inflation target today.”

“This should be another signal for the Bank of Canada to cut interest rates further in the coming months. And the recent weakening of the labour market gives it every reason to do so. Therefore, unless today's figures surprise to the upside, the Bank of Canada is likely to deliver the next cut in early September and the CAD will remain under pressure.”