BoC stuck between a rock and a good place – TDS

FXStreet Insights Team FXStreet

The Bank of Canada is caught in a conundrum, trying to balance the impacts of trade uncertainty - and the threat of escalating tariffs - against a decent run of economic data, TDS' Head of Canadian and Global Rates Strategy Andrew Kelvin reports.

Terminal rate expectations are below levels from January 29th

"Even with the last minute reprieve from broad US trade action, the Canadian rates market is carrying a lingering tariff risk premium - terminal rate expectations are below levels from January 29th, despite strong data in both Canada and the US."

"In the most likely non-tariff scenarios, 2s are somewhere between fair and rich here. We see better asymmetry in steepeners than in outright long positions. Similarly, with Canada-US spreads at extreme levels across the entire curve, we see an appealing asymmetry in legging into short Canada/long US positions."

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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