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Canada CPI, Risk Aversion Rule!
By Mike Conlon | January 20, 2010
This morning, Canada reported its CPI number which came in at -.3% for December and the year over year number at 1.3%, both of which were less than expected. This is significant because the CPI is a measure of inflation, and this number is much less than the Bank of Canada’s inflation target of 2%.
What this means is that it is highly doubtful that that the Bank of Canada will raise rates anytime soon. As I mentioned yesterday, this all but takes a rate hike off of the table until at least the second half of the year. As a result, the Canadian dollar (CAD) is down the most today, especially against the US dollar (USD) and the Japanese yen (JPY) -1.7% and 1.3% respectively.
Also to note is that today is a risk-aversion day. News out of China that they are going to restrict bank lending is a sign that they may be trying to slow down growth and are growing concerned about a potential real estate bubble. As a result, both the Aussie (AUD) and the Kiwi (NZD) are down as well.
The US stock market is also down on China fears, as is both oil and gold. So the Loonie is getting hit with the “triple whammy” today between risk aversion AND CPI numbers.
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