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USD/CAD: BoC rate cut cannot be ruled out in July – ING

The latest contraction in hiring and rising unemployment to 6.2% in Canada have put a Bank of Canada rate cut in July on the table, notes Francesco Pesole, FX analyst at ING.

CAD will continue to underperform

“Our most recent forecast saw the Bank of Canada cutting rates in September, October and December. But the latest contraction in hiring and rising unemployment to 6.2% have put a July cut on the table.”

“Markets are pricing in a 16bp easing for July: we think the deciding factor will be the June inflation report on July 16, after May’s figures came in a bit higher than expected.”

“Still, the market’s pricing for full BoC easing in 2024 looks conservative at 55bps versus our estimate of 75bps. Thus, there is plenty of room for moderate appreciation along the way. We believe the CAD will continue to underperform other commodity currencies given the domestic situation and its lower sensitivity to a fall in USD rates.”

Source: Fx Street

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