CAD: More easing ahead?

Next Wednesday's Bank of Canada policy meeting will likely get all the attention as the recent commodity sell-off has increased the chances of further easing. Currently, markets are pricing around a 50% chance of a 25bp cut for this meeting and fully pricing it for the second half of 2015. Even though it is difficult to call for a rate cut on next Wednesday, the risks are tilted towards an easier monetary policy in the future. 

"We see further weakness in CAD crosses as the investment outlook should continue to weigh on growth and consequently will have an impact on the BoC's reaction function, particularly after the recent mixed economic data has proven insufficient to fulfil BoC's projections", says Barclays.

The Canadian dollar will stay in its path towards the 2008 highs (1.3100) during the next few months.

In terms of data, headline inflation on Friday is expected to show a y/y decline of -0.2%, while core inflation is expected to remain around the 2% target (consensus: 2.1%).