The CADJPY exchange rate has a breakout in sight as the economy releases core inflation figures.
CADJPY – Weekly Chart
The target level is 100.87 for CADJPY, and a higher inflation print would help to get there.
Inflation in Canada is expected to come in at 4.3%. Another slowdown from last month’s core inflation of 5.2% is likely to slow down from 4.7% to 4.4%.
A higher figure would likely see gains for the Canadian dollar as traders expect the central bank to remain cautious.
Oil prices have been boosting the CADJPY exchange rate, but the price of crude oil hit resistance at $82.50 and was lower on Monday.
The yen has also slowed due to the new BOJ governor’s plan to remain with the previous governor’s loose monetary policy. Kazuo Ueda said negative interest rates and yield curve control remain appropriate.
After his first monetary policy meeting later this month, markets were looking to see how quickly the new BoJ governor could change the current path of buying bonds to keep 10-year yields close to zero. However, Ueda signalled the purchases would continue.
“In light of the current economic, price, and financial conditions, it is appropriate to maintain the yield curve control for now,” he said.
Meanwhile, Canadians are turning against Prime Minister Justin Trudeau’s management of the country’s finances. A new poll showing only 27% support him against Canada’s political leaders to support economic growth, down from 35% before the pandemic. Conservative Leader Pierre Poilievre is now leading with 30% of respondents after a Nanos Research for Bloomberg survey.
Trudeau’s Popularity Takes Another Blow
During the pandemic, the Trudeau government ran considerable deficits to pay for support programs for workers and businesses. Trudeau also switched finance chiefs in 2020 when Bill Morneau resigned after a fallout with the prime minister.
Trudeau and finance minister Cynthia Freeland have said subsidies for green energy projects are required to develop a low-carbon industry in Canada on a level with the US economy. But economists criticised Trudeau for the size of the debt he’s taking on.
“The industrial transformation our economies require is huge,” Freeland said in Washington. “It’s going to take a lot of money and governments are going to need to invest so that private capital gets involved.”
The Canadian dollar could suffer if the enormous deficit spending continues.
