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Sentiment in Canada is turning. And that is not only due to the imminent change in government following the surprise majority achieved by the Liberal Justin Trudeau. The economy too seems to be picking up again following a weak first half. The Bank of Canada (BoC) is therefore likely to take a wait and see approach today and leave interest rates unchanged, as inflation is not creating too much pressure either.
"The risks for the economy seem balanced: on the one hand Canada is of course not able to avoid global risks either, but on the other hand strong demand from the US and the weak CAD are supporting the industry outside the energy sector. Against this background the economic stimulus announced by the new government is likely to take the pressure off the BoC regarding a further rate cut", said Comerzbank in a report on Wednesday.
The fact that CAD will remain under pressure for the time being is due to speculation about rate hikes in the US rising again towards year-end as well as the BoC's determination that a stronger currency must not endanger the economic recovery.
