Bank of Canada Leaves the Door Open to a June Cut

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The Bank of Canada has left the target for the overnight rate at 5% and is continuing with its policy of quantitative tightening. However, there are subtle dovish shifts in the bank's commentary that suggest they are open to a June rate cut if inflation and unemployment continue with their current momentum. The bank expects growth to pick up in 2024 and for inflation to move below 2.5% year-on-year in the second half of 2024. Governor Tiff Macklem stated that a June rate cut is within the realm of possibilities. The pricing of a June rate cut has receded, but if the unemployment situation continues to soften and inflation moderates, the bank is likely to carry through with a June rate cut. The Canadian dollar is facing downside risks, and the proximity to a rate cut in Canada contrasts with the hawkish stances of other central banks. The short-term outlook for USD/CAD is driven by the USD leg, and the widening gap between USD and CAD rates should help build a floor for USD/CAD as high as 1.3600. A move to 1.3750/1.3800 in the coming weeks is possible.

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https://uk.investing.com/analysis/bank-of-canada-leaves-the-door-open-to-a-june-cut-200604834