CAD Opens at 1.4163 Amid BoC Rate Cuts and Global Policy Shifts

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.4050-1.4270

Euro                 1.4770-1.5000

Sterling            1.7920-1.8140

WTI Oil (opening level) $70.51

The CAD is opening at 1.4163 ( 0.7060)

·    The Bank of Canada cut rates by 50bps as was expected, taking the target rate to 3.25% from a peak of 5% and now matching the top end of the BoC's neutral rate estimate. The BoC also removed language from the statement about it being reasonable to expect further rate cuts if the economy evolves in line with forecast. Instead, the BoC said it will evaluate the need for further rate cuts one decision at a time, with decisions guided by incoming information and their assessment of the implications for the inflation outlook. This suggests a more gradual approach as the central bank has removed restrictiveness from the policy. Looking ahead through end-2025, money markets imply 61bps of easing, vs the 72bps of easing beforehand as the BoC signals a slower path ahead. BoC Governor Macklem said Trump’s threatened 25% tariff policy represents a “major new uncertainty” for the Canadian economy.

·    ECB preview: The European Central Bank meets today and is expected to cut rates by 25 basis points to 3.15% from 3.4%. The growth outlook has worsened since the last ECB meeting and disinflation progress has continued, suggesting Lagarde’s press conference tone could also be dovish. Political uncertainties in France and Germany are making forecasting difficult for the ECB.

·    US Nov. CPI came in as expected, cementing calls for a quarter-point rate cut at next week’s FOMC meeting. Headline CPI rose 0.3% M/M and 2.7% Y/Y (prev. 2.6%). Ex Food and Energy CPI rose 0.3% M/M and 3.3% Y/Y (prev. 3.3%). Housing metrics also started to show some softening. Some concerns of inflation stickiness remain as this is the fourth straight 0.3% MoM print on the core which makes the 2% goal look difficult to achieve, but that will be more a 2025 concern.