EUR/CAD trades around 1.5640 on Wednesday, gaining 0.06% on the day at the time of writing, despite the Bank of Canada’s (BoC) decision to raise its benchmark interest rate by 25 basis points (bps) to 2.50%.
MUFG’s Derek Halpenny sees an 80% implied probability of a BoC hike but doubts Governor Macklem will validate the 100 bps of tightening priced through next September. With weak Canadian labour data and lingering US trade risks, he sees little room for front-end yields to rise further.
National Bank of Canada (NBC) economists Taylor Schleich and Ethan Currie argue that economic slack and contained core inflation have allowed the Bank of Canada to be patient, but sustained high Oil prices and a firmer growth backdrop now point to a rate hike.