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- USD/CAD: Loonie to enjoy the combination of fiscal stimulus and a hawkish BoC drift – HSBC
USD/CAD: Loonie to enjoy the combination of fiscal stimulus and a hawkish BoC drift – HSBC
FXStreet reports that in the view of economists at HSBC, the combination of a less dovish BoC and fiscal stimulus should be CAD positive over the near term.
“The BoC left its policy rate unchanged at 0.25%, while it announced that it will reduce its weekly net purchases of Government of Canada bonds to a target of CAD3 B a week. The more impactful revelation was the BoC’s guidance around the likely timing of a move on interest rates. Based on the BoC’s latest projections, economic slack will be absorbed with inflation sustainably at the 2% target in 2H22, rather than the previous guidance of ‘into 2023’.”
“On the fiscal front, Canada’s federal government is committed to stimulus even as the domestic economy is set to rebound strongly in 2H21. While the recovery in some nations has been delayed by fresh waves of COVID-19 and slower vaccine roll-out, these are likely to be temporary setbacks. A patient Fed is also likely to see the USD weakening over the next few months. Overall, we expect the CAD to strengthen modestly against the USD over the next few months.”
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