1. The BOC has been one of the least dovish central banks among the majors for the past couple of months, and in March, after a batch of much better than expect economic data the banks announced a discontinuation of their market functioning purchase programs in March, which saw participants expecting the bank to taper their QE program at the April meeting.
2. Even though the virus situation saw some participants getting cold feet about the bank moving forward with tapering the bank came out much more hawkish than was expected at their meeting today by doing all that was expected (tapering QE, upgrading growth outlook) and also brought forward their first interest rate hike expectation to 2022 from 2023, which is the first central bank among the majors to normalize policy and confirm market expectations for faster normalization (bullish for the CAD).
3. Compared to the EUR where the fundamental bias is still tilted to the downside based on a couple of various factors.
Trade risks:
1. Any major negative catalyst which sparks big risk off flows in the market would be a big risk for the CAD as it could affect it negatively from a high beta point of view.
2. Any sudden deterioration in oil prices could also impact the CAD, so tomorrow’s climate summit will be important to keep on the radar (more med term also keeping the Iran nuclear deal in focus as well).
3. Continued USD weakness even though this should arguably be more positive for both the EUR and CAD, the EUR’s sensitivity to the dollar has once again made itself visible in the past few weeks, lending a hand to the EUR pushing higher, so any further strong moves lower in the USD could favour the UER more than the CAD.
2. Even though the virus situation saw some participants getting cold feet about the bank moving forward with tapering the bank came out much more hawkish than was expected at their meeting today by doing all that was expected (tapering QE, upgrading growth outlook) and also brought forward their first interest rate hike expectation to 2022 from 2023, which is the first central bank among the majors to normalize policy and confirm market expectations for faster normalization (bullish for the CAD).
3. Compared to the EUR where the fundamental bias is still tilted to the downside based on a couple of various factors.
Trade risks:
1. Any major negative catalyst which sparks big risk off flows in the market would be a big risk for the CAD as it could affect it negatively from a high beta point of view.
2. Any sudden deterioration in oil prices could also impact the CAD, so tomorrow’s climate summit will be important to keep on the radar (more med term also keeping the Iran nuclear deal in focus as well).
3. Continued USD weakness even though this should arguably be more positive for both the EUR and CAD, the EUR’s sensitivity to the dollar has once again made itself visible in the past few weeks, lending a hand to the EUR pushing higher, so any further strong moves lower in the USD could favour the UER more than the CAD.