Canada’s economic docket opens on Monday with the key Consumer Price Index (CPI) figures for March, which will be closely watched to gauge the inflationary impact of the war in Iran. The data, released by Statistics Canada, is likely to confirm a significant increase in price pressures, driven by higher energy costs.
Market analysts foresee the monthly CPI accelerating 1.1%, more than twice the 0.5% reading seen before the war started in February. Meanwhile, on an annual basis, the CPI is expected to have grown at a 2.5% year-on-year (YoY) rate, from 1.8% in the previous month.
The sharp increase in Oil and Gas prices, due to the blockade of the Strait of Hormuz, would have been the main driver of higher inflationary figures. However, the core inflation, which strips the influence of energy and food prices, is seen fairly steady, rising 0.3% in March, compared to 0.4% in the previous month, and ticking up to 2.4% from 2.3% year-on-year.
These figures are likely to raise some eyebrows at the Bank of Canada’s (BoC) monetary policy committee, and, highly likely, bring the possibility of a rate hike back to the table. The BoC has lowered interest rates by 2.75% over the last two years.
What can we expect from Canada’s inflation rate?
Canada’s central bank left its benchmark interest rate unchanged, at 2.25%, at its March 18 meeting, but the monetary policy statement already warned about “increased volatility in global energy prices and financial markets, and heightened the risks to the global economy”, stemming from the US-Iran war.
Inflation data for March will corroborate those fears. As previously stated, headline CPI inflation is expected to rise to 2.5% while core inflation would pick up to 2.4%, in both cases significantly above the central bank’s 2% inflation target.
These figures will definitely raise market speculation about monetary tightening, although the broader macroeconomic picture clouds the bank’s monetary policy stance. The Canadian economy contracted by 0.2% in the last quarter of 2025, and the monthly Gross Domestic Product (GDP) showed a meagre 0.1% growth in January. Ivey Purchasing Managers’ Index (PMI) data from March revealed that business activity contracted for the first time since November, hinting at a soft end of the quarter.
In this context, BoC policymakers are likely to think twice before hiking interest rates too early, as it might damage an already frail growth, tipping the economy into a recession. ING’s analyst Francesco Pesole points out: “Markets are pricing around 40bp of tightening by December, which looks too aggressive considering the BoC has not signalled much appetite for hikes, and attention may soon shift to USMCA renegotiations – a major downside risk for Canada’s activity and jobs.”
When is the Canada CPI data due, and how could it affect USD/CAD?
Canada’s Consumer Price Index figures for March will be released by Statistics Canada on Monday at 12:30 GMT. Higher inflation figures, when they are driven by stronger economic activity and a tight labour market, tend to have a positive impact on the currency. This time, however, the scenario is somewhat different.
Canadian economic growth remains sluggish, weighed down by the higher tariffs from the US, its main trading partner. With this in mind, a sharp increase in inflation will create a headache for the Bank of Canada, which will have to choose between supporting economic growth and combating inflation, and might hurt the Loonie.
All things considered, a strong CPI is likely to raise concerns about stagflation and put the Canadian Dollar under pressure. In the current scenario, the CAD would be favoured by softer-than-expected inflation figures, which would buy some time for the Bank of Canada to wait for additional data before deciding its next monetary policy steps.
Regarding the USD/CAD, Guillermo Alcala, FX Analyst at FXStreet, observes the pair’s downward trend since early April, rather due to the US Dollar’s weakness, amid investors’ optimism about a resolution of the Middle East conflict, than to any intrinsic Canadian Dollar strength.
“Canadian Dollar bulls are focusing on the area between 1.3650 and 1.3670, where the USD/CAD found support last week and also on March 16 and 23, before the March 9 low at 1.3525”. Alcalá, however, warns about technical indicators: “The overbought levels in the 4-hour Relative StrengthIndex (RSI) and some bearish divergence in the Moving Average Convergence Divergence (MACD) histogram suggest that a corrective reaction might be ahead.”
On the upside, Alcalá sees the “1.3735 area (April 14 low) as immediate resistance, ahead of the April 15 high, right below 1.3790, and the April 13 highs around 1.3875.”
Economic Indicator
BoC Consumer Price Index Core (MoM)
The BoC Consumer Price Index Core, released by the Bank of Canada (BoC) on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. It is considered a measure of underlying inflation as it excludes eight of the most-volatile components: fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation and tobacco products. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.
Next release: Mon Apr 20, 2026 12:30
Frequency: Monthly
Consensus: –
Previous: 0.4%
Source: Statistics Canada
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.