Canadian Dollar Price (USD/CAD), News, and Analysis:
- BoC expected to leave policy unchanged, but will they give the markets a hint?
- Oil[1] continues to rally, boosting the Loonie[2].
The Bank of Canada is expected to leave all monetary policy measures unchanged at today’s meeting after announcing a cutback in bond purchases at the April meeting. BoC governor Tiff Macklem however may hint at further tapering down the road if he, and the MPC, believe that the rebound in the Canadian economy is sustainable. Canadian GDP rose by 5.6% in Q1, helped by a robust employment market, although the economy contracted by 0.8% in April as localised lockdown measures were reintroduced to prevent a third covid-19 outbreak. The central bank revised 2021 growth upwards to 6.5% from a prior 4.0%, with growth moderating to 3.75% in 2022 and 3.25% in 2023. The central bank also sees inflation rising to the high end of their 1%-3% range, although this is seen as temporary with price pressures returning to 2% in H2 2022 as slack in the economy is absorbed.
The rally in oil[3] prices continues unabated with US crude above $70/bbl. and Brent crude above $72/bbl. The Canadian dollar[4] remains strengthened by the oil complex and with economies around the world re-opening at pace, there seems little reason for oil to fall much below these levels.
On the other side of the pair, the US dollar[5] continues to build support despite lower US Treasury yields. On Thursday, the latest look at US CPI is expected to show price pressures building with the core y/y rate rising to 3.4% from 3% in April, while the wider inflation rate is seen hitting 4.7% from 4.2% in the prior
