• The Canadian Consumer Price Index is seen losing further traction in July.
• The BoC could extend its easing cycle in the latter part of the year.
• The Canadian Dollar appears firm against its US counterpart so far in August.

Canada is poised to release the latest inflation figures on Tuesday, with Statistics Canada publishing the Consumer Price Index (CPI) data for July. Forecasts suggest the continuation of disinflationary trends in the headline CPI, while another uptick in the core reading, as it happened in June, could add some volatility to the release.

Alongside the CPI data, the Bank of Canada (BoC) will also unveil its core Consumer Price Index, which excludes volatile components like food and energy. In June, the BoC core CPI recorded a 0.1% drop against May’s reading and a 1.9% gain over the last twelve months, while the headline CPI climbed by 2.7% over the past year and contracted by 0.1% from the previous month.

These numbers are under close scrutiny, as they could impact the Canadian Dollar (CAD) in the short term and shape expectations for the Bank of Canada's monetary policy, particularly after the central bank cut its policy rate by an extra 25 basis points (bps) to 4.50% in July.

In the FX world, the Canadian Dollar gathered strong traction following year-to-date lows near 1.3950 against the Greenback on August 5. So far, the downside in USD/CAD remains well guarded by the key 200-day SMA near 1.3600 the figure.