CAD: BoC has already disappointed expectations for further easing - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 21, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that the Canadian dollar has at least temporarily stabilized deriving support from the BoC’s decision to leave monetary policy unchanged at yesterday’s meeting.

    Key Quotes

    “The decision was viewed as a close call although the market had shifted in favour of rate cut ahead of the meeting. The BoC’s decision to leave monetary policy unchanged was influenced by the sharp weakening of the Canadian dollar which has already resulted in overall monetary conditions in Canada loosening significantly helping to support economic growth and inflation.

    Overall monetary conditions in Canada are now at their loosest level since early in 2003. There is scope for the government to loosen fiscal policy as well to help support economic growth. A fiscal package is expected to be announced in March.

    Still the BoC has materially downgraded its outlook for economic growth which is expected to expand by a below trend 1.4% in 2016. The BoC’s decision to refrain from further easing prompted a relief rally for the Canadian dollar. However, the direction of the loonie in the near-term is likely to remain primarily driven by the price of crude oil. We still maintain a bearish bias.”
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