MUFG on BoC & CAD - FJElite
- The Canadian dollar has continued to rebound against the US dollar resulting in USD/CAD hitting a low yesterday at 1.4071 as it moves further below the high from 14th October at 1.4300. The Canadian dollar has outperformed recently alongside the other G10 commodity currencies of the Norwegian krone and New Zealand dollar. The one exception has been the Australin dollar which has bene the worst performing G10 currency perhaps reflecting its tighter link to AI related demand. The recent wobble for Al-related trades may have weighed more on the Aussie than other G10 commodity currencies.
- The Canadian dollar has been boosted by the hawkish repricing of BoC rate hike expectations. The Candina rate market has moved to more fully price in a 25bps hike as soon as next week. There are currently around 21bps of hikes priced in compared to only 9bps at the end of last week. Those expectations have been encouraged by three major Canadian banks all changing their rate calls to a hike at next week’s policy meeting. The latest inflation data from Canada released yesterday was mixed with headline and core inflation measures coming in a little softer than consensus forecasts at around 3.1% and 1.9% respectively in September. The BoC also released its latest business and consumer outlook surveys which found that households’ longer-term inflation expectations are rising. Roughly half of the businesses surveyed also plan to pass along some or all of their cost increases from higher energy prices and tariffs to customers.
