Jane Foley, Senior Currency Strategist at Rabobank, comments that markets await some cues regarding the negative impact of oil from today's BoC's policy report, and further anticipates that the oil price impact might lead the USD/CAD pair towards 1.22 levels in the next 3 months.
Key Quotes
“In his speech earlier this month, BoC Deputy Governor Lane reported that the impact of stronger US growth and the weaker CAD will have boosted non-energy exports, investment spending and job creation. However, he warned that the net impact from the drop in oil prices was negative for the Canadian economy as lower incomes “in the oil patch and along the supply chain spill over” to the rest of the economy. He reported that the BoC will look through its immediate and temporary negative effects on CPI inflation but will monitor its broader effects on growth and the delay it may cause to the economy’s recovery.”
“In additional to its regular policy meeting, the BoC is today due to release its Quarterly Monetary Policy Report. The markets will be looking for a little more detail on the expected net negative impact from the decline in the oil price, although market rates have already shifted and are now pointing to a greater risk of an interest rate cut over a hike this year.”
“On the expectation that the BoC will repeat the recent warnings from both Poloz and Lane that the net impact of the fall in oil prices on Canada are negative, there is clear risk that policy statement will be more dovish than December’s post policy meeting commentary.”
“In respect of the impact of the oil price, we recently revised higher our USD/CAD forecasts and look for a move towards 1.22 on a 3 mth view.”
Key Quotes
“In his speech earlier this month, BoC Deputy Governor Lane reported that the impact of stronger US growth and the weaker CAD will have boosted non-energy exports, investment spending and job creation. However, he warned that the net impact from the drop in oil prices was negative for the Canadian economy as lower incomes “in the oil patch and along the supply chain spill over” to the rest of the economy. He reported that the BoC will look through its immediate and temporary negative effects on CPI inflation but will monitor its broader effects on growth and the delay it may cause to the economy’s recovery.”
“In additional to its regular policy meeting, the BoC is today due to release its Quarterly Monetary Policy Report. The markets will be looking for a little more detail on the expected net negative impact from the decline in the oil price, although market rates have already shifted and are now pointing to a greater risk of an interest rate cut over a hike this year.”
“On the expectation that the BoC will repeat the recent warnings from both Poloz and Lane that the net impact of the fall in oil prices on Canada are negative, there is clear risk that policy statement will be more dovish than December’s post policy meeting commentary.”
“In respect of the impact of the oil price, we recently revised higher our USD/CAD forecasts and look for a move towards 1.22 on a 3 mth view.”
