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The release of Canada’s Consumer Price Index (CPI) numbers for January on Tuesday will be the focus of attention. In fact, the Statistics Canada data will provide the Bank of Canada with a needed update on price pressures ahead of its meeting on March 18, when policymakers are widely expected to keep interest rates steady at 2.25%.
Economists see the headline CPI rising 2.4% in the year to January, still above the Bank of Canada’s target and on par with December’s increase. Prices are expected to increase by 0.1% per month. The bank will also closely monitor its core measures (which remove food and energy costs), which stand at 2.8% y/y in the last month of 2025.
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Analysts remain concerned after inflation rose last month, and the risk of US tariffs impacting domestic prices adds another layer of uncertainty.
What can we expect from Canada’s inflation rate?
At its last meeting, the central bank made it clear that the policy is at the level necessary to maintain… Inflation soon Target 2%, assuming the economy develops as expected. However, officials also wanted to emphasize that they are not on autopilot. If expectations weaken or inflation risks re-emerge, they are willing to adjust.
In reality, The atmosphere was cautiously reassuring regarding inflation . Overall inflation is expected to be close to the target, with spare capacity in the economy contributing to offset some of the cost pressures associated with trade reform. However, core inflation remains quite high, a reminder that the disinflation process has not been fully completed.
So inflation remains the key variable to watch. A quick look at the latest numbers showed that headline CPI rose slightly to 2.4% year-on-year in December, while core inflation fell to 2.8% year-on-year.
In addition, the bank’s preferred indicators, CPI-Common, Average Cargo and Median, were also revised, but continued to exceed the target of 2.8%, 2.7% and 2.5%, respectively.
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When are Canadian CPI data due, and how could they affect USD/CAD?
Markets will be fully focused on Tuesday at 1:30 GMT, when Statistics Canada releases January inflation numbers. There is a sense of anxious anticipation, with traders concerned that price pressures may be more stubborn than expected and support the broader trend.
The steam lines are likely to be reprinted hotter than expected, leading to fears that Costs related to customs duties have begun Finally it extends to consumers. This in turn can push the church pew towards More cautious tone In a short time. It also tends to provide short-term support for the Canadian dollar, as investors reassess policy expectations that increasingly depend on the evolution of trade tensions and their impact on inflation.
Pablo Piovano, senior analyst at FXStreet, points out that the Canadian dollar Give up some gains In the last days, the USD/CAD was able to recover moderately after the 1.3600 mark, all after the annual low reached below the 1.3500 support reached at the end of January.
Piovano notes that a return to the bullish tone could push the point towards the February high at 1.3724 (February 6), ahead of the 55-day interim average around 1.3760. On the downside comes the still relevant 200-day moving average near 1.3820, ahead of the 100-day moving average near 1.3870 and the 2026 ceiling at 1.3928 (Jan 16).
On the other hand, Piovano indicates that there is a key support located at the 2026 minimum, at 1.3481 (January 30). Losing this level could open the door to visit the September 2024 floor at 1.3418 (September 25).
“Also, the momentum indicators continue to collide: the Relative Strength Index (RSI) is approaching the 45 mark, while the Average Directional Index (ADX) near 28 indicates a fairly strong trend,” he says.
