Market news

22 January 2020

CAD: 4 reasons for likely constructive BoC tone - BofA

eFXdata reports that Bank of America Global Research discusses its expectations for today's BoC policy decision.

"We expect the Bank of Canada (BoC) to remain on hold on 22 January to keep the overnight rate target at 1.75%. Inflation and core inflation are slightly above target and the economy is operating near capacity," BofA notes.

"In our view, the central bank is likely to remain constructive due to four reasons. The first is the fiscal stimulus announced by the federal government. The second is reduced trade uncertainty given the ratification of the USMCA by the US and Mexico and the US-China phase one agreement. The third is the recent increase in population growth due to immigration. And the fourth reason is the larger-than-previously-believed investment in 2019.

"With USD/CAD around our estimate of medium term fair value, we continue to see scope for some risk premium to build over the near term, pushing the exchange rate temporarily higher to 1.32," BofA adds.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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