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After losing as much as 1 % against the greenback following the Bank of Canada (BoC) meeting, the loonie has been retracing back, bouncing by 0.70%. Yet major questions arise as both today’s FOMC rate decision as well as Canadian manufacturing PMI come into play. It is therefore very likely that the CAD should continue its progression.
Last Wednesday, the BoC lowered its growth forecast for 2019 from 1.70% to 1.20%, removed its wording concerning future rate hike and starts considering accommodating monetary policy, turning towards a more data dependent approach. Although the Canadian economy remains in a good situation, with inflation close to the 2% target, a tight labor market and vivid domestic consumption, the manufacturing sector remains in pain. However, the situation is expected to improve for the 2Q 2019 while Canadian manufacturing PMI should have progressed in April (consensus: 51.5; March: 50.5). Nevertheless, the evolution of today’s trading session will be mainly skewed towards Fed’s meeting. The key question is whether it will consider strong growth and a tight labor market as the main factors for attention or if weakening inflation should be addressed in its coming forward guidance. It seems more likely that it will stick with current dovish bias, stating that the risk of a global recession is quite lively.
Currently trading at 1.3393, USD/CAD is heading along 1.3350 short-term.
By Vincent Mivelaz
