Andrew Grantham, analysts at CIBC, points out that inflation is sticking closer to target in Canada than other countries, creating no concerns for the Bank of Canada and indirectly, helping the CAD.
“The Fed is getting more dovish, the ECB has extended the timeline it thinks rates will remain at record lows, and the RBA has already cut. All are seeing infl ation rates that aren’t just below target, but which have actually moved down over the past year. Unless next week’s fi gures show a big shift in the three core measures, that doesn’t appear to be a big headache for the BoC at the moment.”
W”e see Poloz and co. remaining on the sidelines for longer than the Fed and longer than markets now anticipate, with a cut not coming until the economy slows again Q2 2020. That would help sustain the near-term appreciation of CAD for a couple more months, before it depreciates again next year.”