Canadian Dollar roils as US PMIs overshadow BoC rate decision

The Canadian Dollar has experienced a decline due to the Bank of Canada’s dovish outlook on inflation, with Canadian inflation not expected to return to the BoC’s 2% target until 2025.

Money markets have reduced bets of a BoC rate cut in April to 40%, from 65% before the BoC’s monetary policy statement. The Bank of Canada’s Governor Tiff Macklem emphasized the BOC’s determination to see inflation come down before adding rate cut discussions.

The Bank of Canada reiterates that monetary policy structure is currently working, but there is still a long way to go on inflation. The Bank of Canada focuses on rising rents and shelter costs alongside high wage growth as problematic areas.

The US Purchasing Managers’ Index (PMI) drove investors into safe havens after US figures beat the market, putting downside pressure on broad-market rate cut hopes. The S&P Global Manufacturing PMI hit a 15-month high of 50.3, while the S&P Global Services PMI component hit a seven-month high of 52.9.