Markets were caught by unexpectedly stubborn US CPI inflation on Tuesday.

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• Markets were caught by unexpectedly stubborn US CPI inflation on Tuesday.
• Canada sees notable lack of representation on the economic calendar this week.
• Canadian Dollar is mixed on the day, but sharply lower against the US Dollar.

The Canadian Dollar (CAD) tumbled against the US Dollar (USD) on Tuesday after US Consumer Price Index (CPI) inflation ticked higher on a monthly basis, sending the Greenback surging across the major currency board. Inflation on an annual basis was also higher than consensus in January, pushing out market hopes of a May rate cut from the Federal Reserve (Fed).

Canada has only a thin showing on the economic calendar this week, and it is relegated to strictly low-tier releases. These include Canadian Housing Starts and Manufacturing Sales on Thursday and Foreign Investment figures on Friday. Canadian January Housing Starts are expected to tick upward slightly, but US Retail Sales will entirely overshadow the release.

The Canadian Dollar (CAD) slipped around three-quarters of a percent against the US Dollar on Tuesday, also losing around half of a percent against the Pound Sterling (GBP). The CAD recovered half a percent against the Swiss Franc (CHF) and around a third of a percent against the New Zealand Dollar (NZD).

The USD/CAD surged to an eight-week high on Tuesday, hitting a near-term high of 1.3578. The pair surged over a full percent bottom-to-top on the day, easily reclaiming the 1.3500 handle.

Tuesday’s bull run in the USD/CAD has the pair breaking into the top side of the 200-day Simple Moving Average (SMA) near 1.3477, and the trick for buyers will be to keep the pair from slumping back into a rough consolidation range below 1.3550. On the bottom end, the 50-day SMA near 1.3417 will provide a near-term technical floor.

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