Statistics Canada is scheduled to release December’s inflation data on Monday. These figures will provide the Bank of Canada (BoC) with crucial, updated information on consumer price trends and are widely expected to reinforce the Monetary Policy Committee’s resolve to maintain current interest rates at their upcoming January 28 meeting.
Economists anticipate that headline Consumer Price Index (CPI) growth held steady at an annualized rate of 2.2% for the fourth quarter. This marks a stabilization following an unexpected surge to 2.4% in September.
Conversely, on a month-over-month basis, inflation is projected to have contracted by 0.3% in the final month of 2025. If realized, this would be the first negative monthly print since August, indicating renewed downward price pressures following modest gains of 0.1% in November and 0.2% in October.
Data Timing and Potential Impact on USD/CAD
The Canadian CPI data is due for release on Monday at 13:30 GMT. The final figures are not expected to generate sustained long-term volatility for the USD/CAD pair, barring a substantial deviation from market consensus forecasts.
While headline inflation is projected to show consistent annualized growth for a third straight month, the impact of any potential monthly contraction will likely be counterbalanced by persistent core inflation pressures. The BoC Core CPI—which strips out volatile seasonal food and energy costs—ran at a 2.9% yearly pace in both October and November. It is highly likely to remain significantly above the Bank of Canada’s 2% price stability target in December, effectively preventing the Bank from implementing further interest rate cuts.
The USD/CAD pair is trading lower on Monday, weighed down by market unease surrounding Trump’s unpredictable trade policies following the announcement of additional tariffs on Eurozone nations. Despite this immediate pressure, the pair’s broader trajectory remains bullish. The US Dollar has rallied nearly 2% against the Canadian Loonie since its late-December lows, and downside momentum appears limited so far.
Given this backdrop, the primary risk lies in a softer-than-anticipated Canadian inflation report, which could provide the US Dollar with additional support to retest seven-week highs near 1.3930. Conversely, a surprisingly strong inflation print might spark speculation regarding a potential medium-term BoC rate hike, thereby triggering a deeper bearish correction in USD/CAD towards key support in the 1.3650 area.