Governor Maccklem reinforced the Bank of Canada’s commitment to its inflation target in a speech Thursday. Statement falcon Macklem does not bode well for the CAD, according to economists at TD Securities.
USD/CAD decline should be bought
« Governor Maclem reverses the shift dovish. Macklem played down the recent improvement in headline CPI and global inflationary pressures and placed more emphasis on domestic factors and the strength of underlying inflation. He also reiterated that long-term inflation expectations are risky and that it is too early to justify a decision-by-decision approach to rate hikes.
“Macklem’s comments should reinforce the desire for a 50 basis point rate hike at the October meeting, but we are hesitant to forecast more given the short duration of central bank comments in this environment, in especially with the economic data starting to cool. We continue to expect a terminal rate of 4.25%.
“Governor Maccklem is a bit loud, though he’s not good enough to sound that convincing. Looks like they’re not ready to “change their attitude” just yet, but maybe it’s not that far off. Another anchor of any type of CAD support has been chipped. »
“We still believe that the decline in USD/CAD should be bought.
“At the moment we expect 1.40 this year, but that doesn’t mean it will be a peak.”
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