CAD Analysis & News
As expected the BoC maintained the overnight rate at 0.25%, alongside the current pace of QE purchases. A reminder that with no MPR, press conference from Governor Macklem or forecasts. It was unlikely that the BoC would alter any monetary policy tools at today’s meeting. Therefore, the main focus for today’s meeting had been on the Bank’s forward guidance, particularly after the recent soft GDP report, however, the BoC continue to expect economic slack to be absorbed in the second half of 2022. In reaction to this, USD/CAD blipped lower to 1.2643 before quickly retracing back to pre-announced levels.
The BoC noted that ongoing supply bottlenecks could weigh on the recovey and in turn stated that decisions regarding future adjustments to the pace of QE purchases will depend on the strength and durability of the recovery. For now, however, the USD remains the key driver across the FX space, including the Canadian Dollar. While oil prices signal CAD to go higher, 5yr CA/US spreads have recently moved in favour of the greenback and thus provide a headwind for the Loonie.
USD/CAD (Inv) & Brent Crude Futures
USD/CAD (Inv) & 5yr Spread
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