Canada: Data pulse stabling? - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that Canada’s data since the BoC’s last meeting (solid jobs, weak retailing, mild inflation pressures) won’t have materially altered the outlook, which gives the BoC the leeway to reiterate its lukewarm tightening bias: “While less monetary policy stimulus will likely be required over time, the Governing Council will be cautious in making future adjustments to the policy rate”.

Key Quotes

“Markets assume much the same, leaving USD/CAD’s low intensity grind higher in force. That said, 1.3000 will offer stiff resistance, just as it did in late Oct.”

“After a solid 3% growth in 2017 the BoC (and consensus) forecast a more moderate 2.1% in 2018. Yet Trudeau’s 2016 fiscal stimulus is still washing through the economy, US growth prospects are firm and oil prices are at 2 ½ year highs. +40bp in BoC hikes are priced in through to July 2018 but if the above growth scenario pans out, the BoC could easily match that. USD/CAD a better sell into 1.30.”