Analysts at TD Securities said that Canada’s May CPI surprised sharply to the upside, with headline inflation firming to 2.4% y/y as prices rose by 0.4% on the month.

• “Core CPI also improved from April, with the average of the Bank of Canada's preferred measures rising from 1.90% to 2.07% y/y.
• This should provide the Bank some comfort with its current policy stance and allow them to push back against market pricing for cuts. However, any potential rate hikes are still a long ways off, with a number of obstacles to clear beforehand.
• FX: CAD caught a bid and will fuel speculation that better days remain ahead. However, we require much-improved activity data to confirm. In the short-term, however, CAD may enjoy a better bid on the crosses (like EUR and AUD) than against the USD, where it trades a touch rich.”