CAD: Today’s Bank of Canada cut not the last – ING

Markets are fully pricing in a 25bp rate cut by the Bank of Canada today, ING's FX analyst Francesco Pesole notes.

USD weakness can keep USD/CAD around 1.37

"Yesterday, Canada reported headline inflation at 1.9%, below the 2.0% consensus, while core measures were unchanged at 3.0/3.1% as expected. It’s an inflation picture that isn’t concerning enough to prevent a resumption of rate cuts, given the backdrop of job market deterioration. Unemployment has reached 7.1%, the highest since 2021, the economy contracted by -1.6% QoQ annualised in the second quarter, and activity surveys point to further downside risks."

"We expect another cut by the BoC in December, which is now also almost fully priced in. The BoC has kept its guidance very open-ended, and we doubt policymakers want to push back against easing bets at this meeting."

"The reaction in CAD today may not be that significant as markets retain strong data dependence for any material adjustments in rate expectations. We retain a bearish bias on CAD against most of the G10, although USD weakness can keep USD/CAD stable or slightly offered around 1.37."