USD/CAD drops as Canada CPI hits 2.4% y/y, beats 2.2% forecast

USD/CAD fell 0.2% to 1.4380 following Canada's December CPI release, which came in at 2.4% year-over-year, exceeding the 2.2% consensus forecast. The inflation acceleration from November's 2.2% marks a reversal in the previous disinflationary trend. Core inflation measures remained elevated with Bank of Canada core at 2.8%, though slightly down from 2.9% previously. The monthly headline CPI contracted 0.2%, while core monthly inflation held steady at 0.2%. Excluding gasoline, inflation surged to 3.0% from 2.6%, indicating broad-based price pressures. The stronger-than-expected inflation data has increased market expectations for potential Bank of Canada rate hikes in 2024, with traders now pricing in higher odds of tightening. Technical resistance for USD/CAD sits at 1.4420, while support has formed at 1.4350. Further CAD strength could materialize if the BoC adopts a more hawkish stance in upcoming communications.