USD/CAD: Oil prices and border reopening plans to fuel the loonie – Credit Suisse

FXStreet reports that economists at Credit Suisse remain constructive on CAD ahead of today’s Bank of Canada rate decision. 

“We suspect that the weaker-than-expected May employment data, against the backdrop of a market well-positioned for CAD strength, might have been the culprit behind the divergence between the loonie and energy prices. The slight pullback in BoC tightening expectations over the coming 3 years from a 151bp to 138bp (as implied by forward OIS markets) is somewhat consistent with this view.”

“Ahead of today’s BoC interest rate decision, our constructive bias on CAD remains intact, and we see limited risks around today’s rate decision. We do not anticipate any new tapering announcements today, and do not see a high risk of a downgrade in forward guidance, as inflation, growth and vaccination data remain largely in line with the April MPR assumptions, despite the recent weak employment data.” 

“The rapid pace of Covid vaccinations and the recently announced reopening plans across Canada suggest that the BoC’s call for an H2 rebound in employment remains valid.”