The Canadian dollar was already weak after being unable to take advantage of the strong domestic jobs report and rising oil prices. And then it got a blow from the BOC:
Here is their view, courtesy of eFXnews:
The cuts from the Bank of Canada weren’t to rates, but instead to its economic outlook.
In a move that was telegraphed in the last rate announcement, its forecast for 2017 and 2018 have been brought down to 2%, a few ticks lower than they had previously anticipated. Although those estimates are still a touch stronger than we are expecting, the Bank cites that the output gap is now only supposed to close by mid-2018. That time frame is categorized as “materially” later than previously anticipated, a warning to markets that the BoC is only operating with a thin margin of error when it comes to what might prompt another rate cut. The reasons for that growth downgrade are what we would have expected. The Bank now sees a lower trajectory for exports and more restrained residential investment in the wake of recent regulatory changes in the housing market. Those following measures related to housing are said to “mitigate risks” to the financial system, a change in tone from the Bank on household vulnerabilities.
All told, a dovish statement from the Bank of Canada that should keep odds priced for another cut despite the recent strength in Canadian indicators.
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