Upcoming CPI From UK, EU & Canada

Inflation expectations are likely to be one of the main forex drivers over the next couple of months.

As the economies reopen, we want to pay close attention to whether prices start to rise, and how fast. This will have an influence on the real interest rates and capital flows as market makers shift funds in a low-interest environment trying to find yield.

Tomorrow we get what could be the baseline for three key economies.

UK Inflation Still Under Wraps

First to report tomorrow is the UK. And, as usual, it will provide a mass of data just before the market opens.

Out of all the different CPIs coming out, the one we want to focus on is the core CPI monthly change. And we want to compare that with the headline CPI monthly change.

Tomorrow’s data is the first inflation reading post-Brexit. And we are expecting some distortion due to the “teething” problems that keep popping up.

The increased paperwork at the border has made getting goods across the Channel more difficult, In fact, many companies have started raising prices. Not all of that will be immediately noticeable in the first row of data, but it might be an explanation if inflation comes in above estimates.

UK Core Jan CPI is projected to come in at -0.2% compared to 0.3% in December. This is a mirror image of the headline CPI, projected to also come in at -0.2% compared to 0.3% in the prior month.

Is Canada About to Take Off?

Canada has been relatively slower in its vaccine rollout compared to its southern neighbor.

On the other hand, the spread of covid has been less. And Canada doesn’t have as much reliance on the service sector as the US does.

Both countries saw their covid cases peak on Jan 3. Economic activity is usually at a minimum in January. This means that relatively speaking, Canada might have had less of an impact from covid than other major countries.

Headline January CPI for Canada is projected at 0.2% monthly compared to -0.2% in December, and a return to the pre-lockdown rate.

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