The BoC rallied 25 basis points as expected, helping to provide two positive catalysts for the CAD. The economists of TD Securities analyze the outlook for the Canadian dollar.
The Bank of Canada did not disappoint.
The market had not fully appreciated a rally, so there is some residual support that will probably come after the move. Next up was the soft US inflation figure for the CAD, likely to add to the tailwinds of broader USD weakness, likely inviting a move to 1.30 in the near future.
That being said, keep in mind that the BoC will maintain its adherence to data reliance just like other central banks. In turn, it is unlikely to commit to another hike, leaving the door open for this to be the last. With that in mind, we also believe that the CAD may lose some of its crossover appeal given our outlook for US growth to slow in the second half, which is likely to have secondary impacts.
The deeper drop in the USD that we expect in the second half will certainly benefit the CAD, but it will not be the best way to play a deeper drop in the Dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
