The Bank of Canada (BoC) is broadly expected to leave its benchmark rate unchanged at 0.50% today. The central bank will go on with its neutral approach as Governor Poloz does not want to derail the ongoing recovery. Despite a setback in the first quarter, inflation has been slowly moving toward the centre of the target band. On the growth side, the Canadian economy has been able to maintain a positive momentum and grew 2.5% y/y in February.
Besides the highly uncertain oil prices path, the President Trump threat remains one of the main concerns. After introducing tariffs on timber imports from Canada, a re-negotiation of NAFTA will be another painful shock for the economy. Therefore, we anticipate that the BoC will mainly stress the uncertainties surrounding the inflationary outlook and the threat of a tighter trade relationship with the US.
USD/CAD’s reaction should remain limited. The currency pair is currently erasing early morning gains and returned to 1.3510. We remain bullish on the pair as we expect market participants will slowly start to switch attention towards the Fed’s tightening path and reload bullish bets on the greenback.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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