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27 Mar 2015
BoC might cut rates again in July – Nomura
FXStreet (Barcelona) - Charles St-Arnaud, Research Analyst at Nomura is of the opinion that the Bank of Canada might cut rates again in its July meeting, and further anticipates USD/CAD to reach 1.29 in Q3.
Key Quotes
“The BoC has argued that the cut in January was ‘insurance’ and that cutting pre-emptively has provided it with time to better estimate the impact of the oil shock on the economy.”
“Therefore, in our view, the BoC appears patient, and we currently assign a probability of 25% to a cut at the April meeting.”
“We further believe that the BoC could wait until the July meeting before cutting again.”
“Nevertheless, the continued underperformance of the Canadian economy and the continued divergence of its monetary policy with that of the US, where the Federal Reserve is still on track to begin normalising monetary policy, should continue to push USD/CAD higher; we currently expect the cross to reach 1.29 in Q3 and view the current correction as an opportunity for a better entry point.”
Key Quotes
“The BoC has argued that the cut in January was ‘insurance’ and that cutting pre-emptively has provided it with time to better estimate the impact of the oil shock on the economy.”
“Therefore, in our view, the BoC appears patient, and we currently assign a probability of 25% to a cut at the April meeting.”
“We further believe that the BoC could wait until the July meeting before cutting again.”
“Nevertheless, the continued underperformance of the Canadian economy and the continued divergence of its monetary policy with that of the US, where the Federal Reserve is still on track to begin normalising monetary policy, should continue to push USD/CAD higher; we currently expect the cross to reach 1.29 in Q3 and view the current correction as an opportunity for a better entry point.”