USD/CAD[1], BOC Price Analysis & News
- BoC Expected to Stand Pat on Policy
- All Eyes on Accompanying Statement and Governor Macklem’s Speech
OVERVIEW: The Bank of Canada is widely expected to stand pat on monetary policy with the overnight rate to remain at 0.25% alongside no change in the current pace (CAD[2] 4bn/week) or composition of QE purchases. In light of recently announced provincial lockdowns, there have been slight suggestions that the BoC could opt of a micro-cut (less than the conventional 25bps). However, with analysts unanimously calling for rates to be unchanged and OIS markets implying no chance of a move, a micro-cut appears very unlikely.
ECONOMIC DATA: Since the December meeting, economic data has been marginally better than expected. The BoC’s Business Outlook Survey reported on growing optimism amid the announcement of effective vaccines. Although it is worth keeping in mind, that the survey period had been Nov 10-Dec 1 and therefore prior to increased lockdown measures. Elsewhere, the monthly GDP (Oct) figure rose 0.4%, printing ahead of expectations of 0.3%. However, with Canada back under strict lockdown measures, the focus is less on how the economy performed at the end of last year and instead more on how the economy will be impacted in Q1 2021. Additionally, the latest CPI report highlighted that the average of the BoC’s measure of inflation remained steady at 1.7%. The labour market has been somewhat mixed with the most recent reading showed a contraction in jobs created (-62k). That said, this had been solely due to the contraction in part-time workers, while full-time jobs created saw a marginal increase.
Canadian Data Heatmap
Source: Refinitiv, DailyFX
MPR OCTOBER ASSUMPTIONS
