CANADIAN DOLLAR TALKING POINTS
The Canadian dollar[1] is back under pressure as updates to the Gross Domestic Product (GDP) report dampen the outlook for growth, and USD/CAD[2] stands at risk of facing range bound prices over the remainder of the week as market participants mull the timing of the next Bank of Canada (BoC) rate-hike. Nevertheless, recent price action suggests the weakness will persist as USD/CAD initiates a fresh series of lower highs & lows, with the pair now at for a larger correction as the BoC alters the outlook for monetary policy.
USD/CAD Weakness to Persist as Bearish Series Takes Shape
The 1.3% expansion in Canada’s growth rate may keep the BoC on the sidelines at the next meeting on July 11 as the figure falls short of expectations, and the central bank may continue to endorse a wait-and-see approach for monetary policy as officials pledge to ‘to assess the economy’s sensitivity to interest rate movements and the evolution of economic capacity.’
Keep in mind, the fresh projections from Governor Stephen Poloz and Co. may fuel speculation for another rate-hike in 2018 as ‘higher interest rates will be warranted to keep inflation near target,’ and the BoC may sounds more hawkish in the second-half of the year as ‘inflation in Canada has been close to the 2 per cent target and will likely be a bit higher in the near term than forecast in April.’
In turn, the recent shift in central bank rhetoric may continue to boost the appeal of the Canadian dollar, with USD/CAD now at risk of giving back the advance from the previous month amid the failed attempt to test the 2018-high (1.3125).
