On October 22, KAPU is watching a key turning point for the Canadian dollar: Statistics Canada reported on October 19 that September consumer price index (CPI) rose 3.1% year over year, up from 3.0% in August and just below the 3.2% consensus. It is the final inflation reading before the Bank of Canada's October 28 rate decision.

Energy did most of the pushing. Gasoline prices jumped 27.8% year over year in September, up from 22.8% in August, while overall energy prices rose 19.0%, up from 15.4%. Statistics Canada pointed to crude oil reaching its highest price since May, driven by continued uncertainty around the Middle East conflicts. Strip out energy, though, and inflation is actually cooling: CPI excluding gasoline slowed to 2.2% in September from 2.4% in August, and the Bank's preferred core gauges - CPI-trim and CPI-median - eased to 1.8% and 1.9%, close to the Bank's 2% target.

Markets reacted fast. Before the CPI release, the consensus bet was that the Bank would hold at 2.25% on October 28; within 24 hours of the release, bets flipped to a 25-basis-point hike to 2.50%, with markets currently pricing roughly eight-in-ten odds. The loonie strengthened in step: USD/CAD traded around 1.40 on October 22, down about 1% over five days and at a near four-week high. For anyone needing to exchange RMB into CAD soon, the week before the decision deserves close attention.

1. Rising inflation expectations are the real driver of the flip

It is not just the 3.1% print that moved markets - it is inflation expectations moving up across the board. On October 17, Governor Tiff Macklem said the Bank expects to raise its quarterly inflation forecast significantly this month, citing persistently high crude oil and petroleum product prices.

The Bank's quarterly Business Outlook Survey, released the same day as the CPI data, showed firms now expect inflation of 3.7% a year from now. Nearly a quarter of firms - the largest share since the question was introduced - say they cannot estimate when inflation will return to the 2% target, and about half plan to pass higher costs on to customers. A companion consumer survey showed households' median one-year inflation expectation rising to around 4%.

2. The other side: weak jobs keep a hold on the table

Not everyone is convinced a hike is a done deal. Canada unexpectedly shed 68,300 jobs in September as unemployment rose to 6.5%, clear signs the economy is cooling. Desjardins economist Royce Mendes argues that, given the recent slowdown, the Bank may still make the case that inflation will return to target on its own without a hike this month; other economists note that market pricing reflects expectations, not the Bank's decision, and the odds can still move with incoming data.

To be clear: "roughly eight-in-ten" is where markets are betting now, not a decided outcome. The October 28 decision and the new Monetary Policy Report are the real answer.

3. Why the loonie is stronger: hike expectations plus oil support

Rising hike expectations lifted the Canadian dollar directly: bets on a Bank of Canada hike make CAD assets more attractive and draw inflows. With Brent crude holding at elevated levels, Canada's status as an oil producer adds support - USD/CAD slid from around 1.4158 to around 1.40 over five trading sessions. Traders caution, though, that US-Canada trade uncertainty remains the main headwind for the loonie, with tariff hits to steel, autos and other sectors still being absorbed.

Data snapshot: September inflation and the loonie

Table 1: Key September CPI indicators (year over year)

Table 2: USD/CAD over the last five trading days

Oct 16　1.4158

Oct 19　1.4108

Oct 20　1.4064

Oct 21　1.4049

Oct 22　1.4021

KAPU's Take

Inflation data, the Bank's surveys and rate-hike bets are all pointing the same way. The loonie sits near a four-week high, and the October 28 decision plus the new Monetary Policy Report is the next key event. For anyone with upcoming RMB-to-CAD needs, our practical advice:

First, plan around your payment dates. Volatility may pick up around the decision - if you have firm deadlines such as tuition payments, property closings or family fund transfers, arrange your exchange in advance rather than deciding on decision day.

Second, consider splitting larger amounts. Betting a large sum on a single moment amplifies volatility; splitting it smooths your cost.

Third, watch the actual tradable quote. Moves in the mid-market rate are not your exchange cost - check KAPU's live rates before you exchange. Currency exchange with KAPU carries no service fees: the quote is what you pay.