The inflation data for January, due for publication today, is likely to once again underpin the necessity of a rate step by the Bank of Canada (BoC). This should underpin the Canadian dollar in the long-term, in the view of economists at ING.

USD/CAD to hover around 1.2700 this week

“The January CPI report in Canada today should see headline inflation stabilise marginally below 5.0%, while core measures may see a mild acceleration. All this should continue to underpin the need for the BoC to tighten policy quite aggressively in 2022.”

“We expect USD/CAD to hover around 1.2700 this week, but we continue to see downside risks prevailing in the longer run as the BoC tightening cycle should offer support to the loonie.”

See – Canadian CPI Preview: Forecasts from five major banks, not out of the woods yet