CAD- BoC little moved from election results – Deutsche Bank

By FXStreet FXStreet (Delhi) – Sebastien Galy Macro strategist at Deutsche Bank, suggests that the Canadian growth in 2016 should see little benefit from a promised expansion of fiscal policy under a newly elected Liberal majority and the past fiscal tightening should continue to drag on the economy before the net fiscal impulse turns positive in 2017 to the tune of around 0.4%.

Key Quotes

“The fiscal impact on the Bank of Canada policy setting is hence limited. The Bank is likely to stay on hold for a considerable amount of time, turning more dovish when the CAD rallies and waiting for US exports to continue recovering.”

“Liberal victory reduces fiscal tightening: The liberals won a decisive majority in the Federal elections after a period of great uncertainty. The vote provides a mandate for fiscal expansion inclusive of an average 4.2bn in infrastructure spending over the next four years and tax cuts for the middle class at the expense of top earners. The impact of all the measures is estimated by our economists at roughly 0.3% in 2016 and 0.5% in 2017/2018 as infrastructure projects are slow off the ground. It is too early for precise estimates as the budget will likely be decided only …read more

Source:: FX Street