BoC statement: slightly dovish, watch oil – Nomura

By FXStreet Analysts at Nomura noted the BoC today and explained that, overall, the statement is slightly dovish with the estimate of the impact from the wildfires pushing growth temporarily into negative territory in Q2.

Key Quotes:

“However, contrary to our expectations the BoC did not mention that weak economic momentum going into Q2 is concerning.”

“The data for April (pre-forest fires) will be important for assessing the amount of underlying momentum and will provide a better estimate of the size of the contraction in growth. Nevertheless, the impact on growth of the oil shutdowns will be temporary and a rebound in Q3 should be expected.”

“USD/CAD declined initially on the announcement and, while rebounding, remains lower that the pre-announcement level, suggesting that the market was expecting a more dovish statement.

“We continue to believe that USD/CAD should move higher, as Canadian growth remains weak and the market continues to price in a higher likelihood of a hike in June or July. Moreover, while higher oil prices should be positive, we think the decline in production volumes matter more for growth and the currency.”
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Source:: FX Street