Analysts at TD Securities expect the annual Consumer Price Index (CPI) in Canada to decline to 7.8% in July from 8.1% in June with lower energy prices and larger base effects weighing on the headline print.

USDCAD dips are a buy

"Food prices and rents should bounce back from their muted performance in June, while mortgage interest costs provide another source of strength. We also look for core inflation to hold near 5.0% with only a 0.1pp increase to CPI-common."

"FX: A moderation in CPI should help the market price in peak hawkishness by the BOC. USDCAD dips are a buy and we think legging into topside around the BOC meeting is compelling."

"Rates: CPI is naturally in the hot seat so big surprises will drive relative performance of Canada vs the US. Tactically we are gearing up for September 1 index-driven demand, which should trigger a meaningful supply-demand imbalance in conjunction with no 30y nominal auction this August month-end."