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Economists at TD Securities look for the CAD to retain a supportive tailwind after the Bank of Canada outlined steps to unwind its extraordinary stimulus programs in the weeks ahead.  

Key quotes

“The Bank will suspend or discontinue all remaining liquidity focused programs ‘in the coming weeks’. Term repo operations will be suspended indefinitely in mid-May. The CP, corporate bond and provincial bond programs will not be extended beyond their upcoming planned expiration dates, as we expected, as system wide liquidity remained ‘ample’. Importantly, however, Gravelle confirmed the BoC did not currently plan to sell assets purchased under these programs.”  

“Gravelle dropped strong hints that the BoC would soon begin to reduce its GoC purchases. While Gravelle did not explicitly commit to that decision in April, we do not think it is very hard to connect the dots. Indeed, we continue to look for a reduction in weekly GoC purchases to $3bn at the April policy announcement.”

“We note that the bounce in USD/CAD had been fairly mild in recent days even ahead of Tuesday’s event. Interestingly, the move higher has not been able to hold onto a 1.26 handle “” at least for very long. While we suspect overall USD direction is likely to dominate, we think USD/CAD would be one of the better places to sell dollars if we do get a broader pullback in its latest rebound.”