Canada CPI expected to show a pick-up in inflation in September

Canada’s September Consumer Price Index (CPI) figures will be the focus of attention on Monday. Indeed, Statistics Canada data will provide markets with an update on price pressures ahead of the Bank of Canada’s (BoC) October 28 gathering, when officials are expected to keep the interest rate steady at 2.25%, broadly in line with analyst consensus.

This time, economists expect the headline CPI to pick some upside traction at 3.2% YoY and to rise by 0.2% on a monthly basis, up from the 0.1% contraction recorded in August. The BoC’s core measure (which strips food and energy costs) is forecast to rise by 0.2% inter-month, while remaining steady at 2.4% from a year earlier.

In the current context of heightened geopolitical volatility, crude Oil dynamics are likely to keep inflationary pressures anything but abated, while the lack of progress on the tariffs front is expected to also add to the sentiment.

Still around data, the BoC’s preferred gauges of underlying inflation, CPI-Common, Trimmed Mean, and Median, cooled somewhat in August to 2.6%, 1.9%, and 2%, respectively.

What can we expect from Canada’s inflation rate?

Inflation remained steady in August, although market participants mostly pencil in a pick-up in inflationary pressure due to the persistent tensions in the Middle East and the accompanying uptrend in crude Oil prices.

The BoC delivered a cautiously hawkish hold on September 2, leaving rates unchanged as economic slack and lingering trade uncertainty continue to argue for patience. Still, policymakers appear increasingly uneasy about the inflation outlook. Governor Tiff Macklem’s warning that several rate hikes could be needed suggests renewed tightening is firmly back on the table, particularly if Oil prices remain elevated or inflationary pressures begin to spread beyond energy.

So far, market participants expect nearly 23 basis points of tightening by year-end, which is roughly a quarter percentage point.

When is the Canada CPI data due, and how could it affect USD/CAD?

Markets will fully focus on Monday at 12:30 GMT, when Statistics Canada publishes September’s inflation prints. If inflation falls in line with the latest results from its US peer, bets on further rate hikes should likely increase, providing fresh legs for the Canadian Dollar (CAD).

Pablo Piovano, Senior Analyst at FXStreet, notes that USD/CAD has been navigating a downward path since hitting yearly tops near the 1.4300 yardstick earlier in the month.

Piovano points out that the pair remains well above its critical 200-day SMA in the 1.3880 zone, suggesting that further gains are possible in the near term.

If bulls regain control, the next key level is expected at the 2026 top at 1.4299 (October 9 and 14), before the March 2025 peak at 1.4542 (March 4). Further up emerges the 2025 ceiling at 1.4792 (February 3), Piovano adds.

“On the opposite direction, the resurgence of the bearish trend could prompt the pair to revisit its provisional support levels at the 100-day and 55-day SMAs at 1.4035 and 1.4000, respectively. South from here awaits the critical 200-day SMA," he adds.

“Momentum keeps favouring further gains,” he notes, signalling that the Relative Strength Index (RSI) hovers around the 54 level, while the Average Directional Index (ADX) beyond 37 suggests a solid trend.