Canadian Dollar Needs More than Bank of Canada's 'Hawkish' Tone
Warren TakundaSummary:
A Canadian dollar needs greater inspiration from Carney’s government.
The Canadian dollar is losing value on Thursday, hours after the Bank of Canada cut interest rates by 25bp.
The move was widely anticipated and the initial reaction was a measured CAD selloff – nothing dramatic, but softness nevertheless.
If you are transacting during this adjustment, it is sensible to compare live pricing with a firm dealing desk quote to reduce slippage while spreads remain fluid.
The end of the cycle
The Bank of Canada delivered another 25bp cut in October, leaving the overnight rate at 2.25% official statement.
Guidance tilted more hawkish, with policymakers signalling it would take a new shock for easing to continue.
Canadian wage growth has continued to soften, creating room for the October cut.
TD Securities: “We believe 2.25% will mark the end of the BoC’s easing cycle. MPR revisions were modest, and the Bank’s central forecast in the October MPR is broadly in line with our projections for the near-term outlook. The guidance shift should also reinforce a high bar for the Bank to cut again this year, although policy will become more data dependent in 2026.”
Notion vs reality
Notionally, ending a cutting cycle should be CAD positive.
Realistically, it will take more than a hawkish tone to turn the currency.
The government holds the cards
TD Securities: “A 25bp cut with hawkish tone helps CAD on the margin. However, for CAD to see a meaningful rally, you need either a massive fiscal package or some USMCA–trade uncertainty resolution. We see CAD strength vs the US dollar but expect some underperformance vs EUR and AUD.”
Bank of America expects fiscal expansion announcements on November 4 to carry bullish implications for CAD, with new investment-focused stimulus likely to be unveiled analysis.
With the first budget set for November 4, guidance suggests the deficit could rise toward about 3% of GDP as the government pursues major projects and investment attraction.
For corporates planning Q4 flows, securing executable pricing ahead of budget headlines can be prudent while liquidity is deep and before volatility picks up.
BoC’s tone supports CAD at the margins, but a durable turnaround likely needs fiscal firepower or USMCA clarity – until then, CAD moves will track global dollar trends and incoming policy news.
Source: Poundsterlinglive
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