Canadian Dollar Selloff Extends Following Dovish Tilt at Bank of Canada
PoundSterlingLIVE
Published Jan 24, 2024 10:34
Updated Jan 24, 2024 10:47
Canadian Dollar Selloff Extends Following Dovish Tilt at Bank of Canada
PoundSterlingLIVE - The Canadian Dollar extended its daily losses against the Pound, U.S. Dollar and other major currencies as the Bank of Canada tilted in a 'dovish' direction in their January policy update.
The statement dropped the earlier reference to a potential need to hike if inflation failed to cool, turning the discussion to how long rates will be required to remain at current levels.
"The Governor noted that the meeting has shifted from a discussion of whether rates are high enough to one about how long they need to keep rates at 5%," says Avery Shenfeld, an economist at CIBC (TSX:CM) Bank.
"That’s a dovish tilt," he explains.
The outcome will disappoint some market participants who were looking for a 'hawkish' pushback from the Bank.
The Canadian Dollar was already weak heading into the BoC decision, weighed by the selloff in the U.S. Dollar. As we have noted before, the two North American currencies tend to move in unison.
The 'dovish' undertones from the Bank of Canada will add to the weakness.
New economic projections show the Bank expects Canada to endure poor growth in the first half of the year, but the second half will likely see growth improve.
"The pick-up in growth projected for the back half of the year might well be tied to their own expectations for lower rates at that time," says Shenfield.
CIBC expects the first Bank of Canada rate cut in June, with as much as 150 bps of cuts on tap this year if the economy is to start moving again after its current stall.
The Pound to Canadian Dollar is witnessing one of its strongest days of the year, advancing 0.64% to its highest level since November at 1.7183.
The Dollar to Canadian Dollar is relatively flat at 1.3470, and the Euro to Canadian Dollar is higher by 0.64% at 1.4697.
An original version of this article can be viewed at Pound Sterling Live
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Written By: PoundSterlingLIVE
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