Canada CPI is seen steady in December, supporting a BoC pause 

• Canadian CPI is expected have grown 2.2% y-o-y for the third consecutive month in December
• Monthly inflation is seen contracting 0.3%, following a 0.1% uptick in November.
• These figures support the idea of a steady BoC monetary policy in the near-term.

Statistics Canada will publish December’s inflation figures on Monday. The numbers will give the Bank of Canada (BoC) a fresh read on consumer prices and are highly likely to provide the bank's Monetary Policy Committee with further reasons to stand pat at their January 28 monetary policy meeting.

The market consensus anticipates a steady 2.2% yearly growth in the headline Consumer Price Index (CPI), unchanged in the fourth quarter of the year. after a sudden jump to 2.4% in September.

Monthly inflation, on the other hand, is seen declining 0.3% in the last month of 2025. This would be the first negative reading since August,, and would confirm the steady deflationary pressures, following a 0.1% gain in November and a 0.2% gain in October.

When is the Canada CPI data due, and how could it affect USD/CAD?

Canada’s CPI data will be disclosed on Monday at 13:30 GMT. The final figures are unlikely to cause a long-term impact on USD/CAD volatility, unless there is a significant deviation from the market consensus.

Headline inflation is expected to grow at a steady pace for the third consecutive month. The potential impact of the monthly contraction, if confirmed, is likely to be offset by the high core inflation levels. The BoC CPI, which excludes the impact from seasonal food and energy prices, rose at a 2.9% yearly pace in October and November and will, most likely, remain well above the Bank of Canada’s 2% target rate for price stability in December, holding the Bank from cutting interest rates further.

The USD/CAD is trading lower on Monday, weighed by market concerns about Trump’s uncertain trade policies after announcing additional tariffs on Eurozone countries. The pair’s broader trend, however, remains bullish. The Dollar has rallied nearly 2% against its Canadian Counterpart since late December lows, and downside attempts remain limited so far.

Against this backdrop, the risk is on softer-than-expected Canadian inflation figures, which might provide the Dollar with additional support to retest the seven-week highs at 1.3930. A strong inflation report, on the contrary, might trigger speculation about a BoC rate hike in the mid-term, and trigger a deeper USD/CAD bearish correction. Key support, in that case, is at the 1.3650 area.