Canada’s CPI rates today

MORNING OVERVIEW

Canada’s CPI rates for August are set to be the main event of the day, thus market attention may shift towards the CAD and its pairs. Other than that, we should note that for tomorrow’s Asian session, CNH traders mat be looking at China’s industrial output rate for August, which is set to showcase an improvement. In the oil markets, Saudi Arabia’s closure of a major crude oil pipeline may have aided oil prices, as the oil supply chain constraints continue to mount.

The objective: Focusing on Canada’s CPI rates but given Canada is an oil-exporting nation, we are keeping a dual focus on both the Loonie and oil prices.

MARKET SNAPSHOT

MARKET	CURRENT	CHANGE	COMMENT
S&P 500	7608	-0.63%	Fed decision this week
DXY	99.43	+0.31%	Fed decision this week
EUR/USD	1.1607	-0.04%	Fed decision this week
Gold	4322	-0.63%	Fed decision this week
Brent Crude	107.290	+2.55%	Oil supply constraints increase

KEY MARKET THEMES

01 — Canada’s CPI rates

Canada’s CPI rates for August are to be released today and may garner attention from market participants for the Loonie. We’re looking at the headline and core CPI rates on a year-on-year level in order to greater grasp the inflation narrative in the Canadian economy, where a rate higher than 3.0% on a headline level and 2.3% on a core level would imply an acceleration of inflationary pressures. In turn, such an implication could provide support for the CAD and vice versa.

Market implication (CAD): NEUTRAL

02 — Brent continues to hold above $100 per barrel

Saudi Arabia has been forced to close a major crude oil pipeline following attacks by Houthi rebels. The forced closure of the pipeline places an even greater restriction on the global oil supply, which has been plagued by the ongoing war between the US and Iran in the region. Therefore, the most recent developments may have provided support for oil prices and could continue to do so should the oil supply disruptions continue.

Market implication (OIL): Bullish

03 — China’s industrial production rate due out tomorrow

China’s industrial production rate for August is set to be released in tomorrow’s Asian session and could provide insight into the state of the Chinese economy. Hence, any rate greater 5.3% could provide support for the CNH. Whereas any rate lower than 5.3% could weigh on the CNH.

Market implication (CNH) : NEUTRAL

WHAT MATTERS TODAY

Canada’s CPI rate for August

Time (GMT+2): 15:30

Expected: N/A
Previous: 3.0%

Potential market reaction:
Any rate higher than 3.0% could provide support for the CAD and vice versa.

Canada’s Core CPI rate for August

Time (GMT+2): 15:30

Expected: N/A
Previous: 2.3%

Potential market reaction:
Any rate higher than 2.3% could aid the CAD and vice versa.

WHAT MATTERS TOMORROW

China’s industrial production rate

Time (GMT+2): 05:00

Expected: N/A
Previous: 5.3%

Potential market reaction:
Any rate higher than 5.3% could aid the CNH and vice versa.

ASSET FOCUS

[GOLD / COMMODITIES]

Gold appears to be moving in a downwards fashion with the commodity currently breaking through our 4320 (S1) support level. Moreover the RSI figure below our chart is currently registering a figure of 45 implying bearish market tendencies.

KEY LEVELS

Resistance (R1): 4520
Resistance (R2): 4695
Support (S1): 4320
Support (S2): 4180

Technical View: BEARISH

CROSS-ASSET VIEW

ASSET CLASS	BIAS	KEY DRIVER
Equities	Bearish	FED
USD	Bullish	FED
Gold	Bearish	USD
Oil	Bullish	Houthi rebels

RISKS TO THE VIEW

The biggest risk to our view is the easing of tensions in the Middle East

Tensions are running high in the Mid-East resulting in higher oil prices. Should the situation showcase signs of easing i.e peace talks/deals or a pause of hostilities, our view could be upended.

TRADING SPHERE VIEW

Bullish for oil prices

Our base case:
Houthi rebels may continue exerting pressure on Saudi Arabia thus further disrupting the oil supply chain.

What would change our view:
A genuine attempt to de-escalate the situation between the US and Iran

TODAY’S WATCHLIST

01 Canada’s CPI rates

02 Speech by ECB Cipollone

Disclaimer:

This information is not considered as investment advice or investment recommendation but instead a marketing communication.