USDCAD daily
The Bank of Canada decision is coming up on Wednesday and it’s entirely likely that Tiff Macklem leaves rates unchanged at 5.00%. The economy is struggling under the weight of higher interest rates and barely grew in the second and third quarters. If anything, the market is pricing in a slight chance of a cut.
The bigger question is when the BOC will pull the trigger on an easing cycle. Current pricing shows the April 10 meeting as the first one that’s entirely priced in. In the case of Canada, I think a few months could make a big difference. The housing market is at a standstill right now until the spring thaw and if rates stay high, it could put further downward pressure on prices. However if the BOC eases in March or April, it could convince buyers to take some near-term pain.
What will be fresh in Macklem’s mind is the mistake he made in 2023. He signaled a pause ahead of sping and that led to a resurgence in housing and shored up inflation. Ultimately, he had to walk that promise back and hiked rates again in July. This time, he might be more inclined to wait until June before cutting.
For now, the Canadian dollar is happy to chop around. USD/CAD rose 43 pips to 1.3538 today on broad USD strength and a third day of selling in oil. The pair had hit a two month low Friday but recouped most of the gain today.