17 Jul 2014
USD/CAD traders awaits key CPI - TD Securities
FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities explained that the release of June CPI tomorrow will be a key factor for USD/CAD.
Key Quotes
"The BoC maintained its forward looking language as they continue to take a neutral stance on the timing and direction of the next move in policy rates. The dovish tone in the communiqué, supported by numerous dovish elements in the MPR, suggests that rate hikes will not be on the table until at least 2015H2."
"The Bank also downgraded its Canadian growth outlooks marginally for this year and next as a reflection of not only the weather-induced slowdown of the first quarter, but also on the lingering effect of uncertainty on business investments and trade, which, combined with deleveraging have yielded "serial disappointment" with economic performance in recent years. As a result, the Bank now sees the output gap closing later, by mid-2016."
"The fact that inflation has accelerated in recent months led to an upward revision to the 2014 forecast and the removal of the reference to "downside risks" from the statement. However, the earlier than expected acceleration of inflation was still attributed mostly to temporary factors not related to economic fundamentals, justifying a weaker inflation profile next year."
"During the press conference Governor Poloz reiterated that closing the output gap relies “on continued stimulative monetary policy and hinges critically on stronger exports and business investments” and that achieving the 2% inflation target on a sustained basis would require the economy to reach and then remain at full capacity."
"The release of June CPI tomorrow will be a key factor for CAD. We are below consensus at -0.2% M/M for both headline and core, which would drive the annual inflation rate down to 2.0% and leave the annual core rate flat at 1.7%. If our forecast comes to fruition, it will lend credit to the Bank's updated inflation forecast, and should see USD/CAD reach for the high 1.07/low 1.08 area."
Key Quotes
"The BoC maintained its forward looking language as they continue to take a neutral stance on the timing and direction of the next move in policy rates. The dovish tone in the communiqué, supported by numerous dovish elements in the MPR, suggests that rate hikes will not be on the table until at least 2015H2."
"The Bank also downgraded its Canadian growth outlooks marginally for this year and next as a reflection of not only the weather-induced slowdown of the first quarter, but also on the lingering effect of uncertainty on business investments and trade, which, combined with deleveraging have yielded "serial disappointment" with economic performance in recent years. As a result, the Bank now sees the output gap closing later, by mid-2016."
"The fact that inflation has accelerated in recent months led to an upward revision to the 2014 forecast and the removal of the reference to "downside risks" from the statement. However, the earlier than expected acceleration of inflation was still attributed mostly to temporary factors not related to economic fundamentals, justifying a weaker inflation profile next year."
"During the press conference Governor Poloz reiterated that closing the output gap relies “on continued stimulative monetary policy and hinges critically on stronger exports and business investments” and that achieving the 2% inflation target on a sustained basis would require the economy to reach and then remain at full capacity."
"The release of June CPI tomorrow will be a key factor for CAD. We are below consensus at -0.2% M/M for both headline and core, which would drive the annual inflation rate down to 2.0% and leave the annual core rate flat at 1.7%. If our forecast comes to fruition, it will lend credit to the Bank's updated inflation forecast, and should see USD/CAD reach for the high 1.07/low 1.08 area."