Latest Developments:
April 21 – At their April meeting, the BOC kept its overnight rate unchanged at 0.25%, as expected. However, the central bank also signalled to markets that it could start hiking rates in late 2022 while also reducing the scope for its bond buying program.
April 21 – Canada CPI for March increased to 2.2% Y/Y, versus a prior of 1.1%. CPI printed at 0.5% M/M, unchanged from prior. Regarding the BoC’s core measures, common CPI increased to 1.5% while trimmed mean increased to 2.2%, and median CPI increased to 2.1%.
April 9 – Canada’s employment report for March saw the unemployment rate fall to 7.5% (prior, 8.2%) with employment change printing at 303.1K (prior, 259.2K).
March 2 – Canadian GDP for Q4 printed at 2.3% Q/Q and 9.6% Q/Q Annualised. The overall encouraging report resulted in an increase in speculation that the BoC could reduce its pace of bond purchases soon than previously expected.
Future Sentiment Shifts:
With oil prices steadily climbing, the outlook for CAD remains stable; however, with that said, the coronavirus remains a significant risk to economies and, hence, to the outlook for oil. Additionally, with oil prices now trading around “fair value” levels, further gains for the commodity will be hard fought.
Of course, the market’s risk tone, in general, will also remain influential and key to CAD’s outlook given its high beta status.
The clearest bias for CAD will result when both oil prices and the risk outlook support one another, i.e. a positive or improving risk outlook and strength in oil prices. However, if these two factors contrast with one another, expect CAD price action to be choppy as the market’s focus shifts between development in oil markets and developments surrounding the coronavirus.
Primary Drivers:
Bank of Canada – Canada’s monetary policy outlook remains key to CAD’s fundamental outlook. Expectations for policy tightening will likely support CAD, while expectations for policy easing will likely pressure CAD.
Oil prices – Oil is Canada’s largest export, accounting for over 17% of Canada’s exports. As such, CAD is highly correlated with oil prices; strengthening when oil prices rally and weakening when oil prices fall.
Risk tone – Due to its high beta status, CAD is strongly correlated with the overall risk tone; strengthening in risk on environments and weakening in risk off environments.
Global economy – Canada is a relatively open economy. As the world’s 12 largest export economy and with exports accounting for 34% of GDP, Canada’s economic performance and outlook is closely tied to the global economy and the global economic outlook.
April 21 – At their April meeting, the BOC kept its overnight rate unchanged at 0.25%, as expected. However, the central bank also signalled to markets that it could start hiking rates in late 2022 while also reducing the scope for its bond buying program.
April 21 – Canada CPI for March increased to 2.2% Y/Y, versus a prior of 1.1%. CPI printed at 0.5% M/M, unchanged from prior. Regarding the BoC’s core measures, common CPI increased to 1.5% while trimmed mean increased to 2.2%, and median CPI increased to 2.1%.
April 9 – Canada’s employment report for March saw the unemployment rate fall to 7.5% (prior, 8.2%) with employment change printing at 303.1K (prior, 259.2K).
March 2 – Canadian GDP for Q4 printed at 2.3% Q/Q and 9.6% Q/Q Annualised. The overall encouraging report resulted in an increase in speculation that the BoC could reduce its pace of bond purchases soon than previously expected.
Future Sentiment Shifts:
With oil prices steadily climbing, the outlook for CAD remains stable; however, with that said, the coronavirus remains a significant risk to economies and, hence, to the outlook for oil. Additionally, with oil prices now trading around “fair value” levels, further gains for the commodity will be hard fought.
Of course, the market’s risk tone, in general, will also remain influential and key to CAD’s outlook given its high beta status.
The clearest bias for CAD will result when both oil prices and the risk outlook support one another, i.e. a positive or improving risk outlook and strength in oil prices. However, if these two factors contrast with one another, expect CAD price action to be choppy as the market’s focus shifts between development in oil markets and developments surrounding the coronavirus.
Primary Drivers:
Bank of Canada – Canada’s monetary policy outlook remains key to CAD’s fundamental outlook. Expectations for policy tightening will likely support CAD, while expectations for policy easing will likely pressure CAD.
Oil prices – Oil is Canada’s largest export, accounting for over 17% of Canada’s exports. As such, CAD is highly correlated with oil prices; strengthening when oil prices rally and weakening when oil prices fall.
Risk tone – Due to its high beta status, CAD is strongly correlated with the overall risk tone; strengthening in risk on environments and weakening in risk off environments.
Global economy – Canada is a relatively open economy. As the world’s 12 largest export economy and with exports accounting for 34% of GDP, Canada’s economic performance and outlook is closely tied to the global economy and the global economic outlook.