CAD aspires to gains despite Macklem’s remarks

The Bank of Canada Governor Tiff Macklem has warned Canadian lawmakers that the economy is in a weaker phase due to higher interest rates, restraining consumption and bringing supply and demand closer to balance.

Tiff Macklem stated that the Canadian central bank is assessing the effectiveness of its monetary policy, stating that it is working to cool the economy and relieve price pressures. If inflation persists, the bank is prepared to raise policy rates to restore price stability. Macklem also highlighted the importance of protecting Canada’s fiscal position. His comments above have little to no impact on the Canadian Dollar. At the time of writing, the USD/CAD pair is trading near 1.3826, unchanged on the day.

The Canadian dollar is aiming for positive ground against the US dollar, while crude oil prices are declining, limiting the Loonie’s topside and inhibiting momentum in the CAD, which is dependent on oil.

Despite declining economic indicators, Canada’s inflation risks remain high. Macklem reiterated that the BoC does not see a recession coming, despite a narrowing path to a soft landing.

Crude oil prices are expected to remain soft on Monday due to geopolitical tensions from the Middle East conflict. WTI Crude Oil bids are down around 3%, limiting CAD upside. Loonie traders should monitor Canadian GDP figures on Tuesday.

Macklem believes that monetary and fiscal policies are driving up inflation, and that Canada’s fiscal position should be evaluated compared to other nations.