Canada’s inflation rate is at its highest level since February 2003, it is the highest level ever since the Bank of Canada started targeting inflation in 1991. The problem that the BoC is facing is that it believes that rates will fall soon, once supply disruptions are alleviated, however this has become rather protracted and it has painted itself into a corner with its comments. One reason that it didn’t hike earlier was the fact that the CAD was stronger to the USD, hovering around the 1.2100 level, if it hiked the CAD would become a lot stronger, impacting exports and causing an economic contraction. Now the CAD is at 1.2600, the BoC doesn’t have to wait for the U.S. to hike first, if the CAD continues to weaken then expect a rate hike sooner than anticipated.
Another narrow range, with a weaker CAD.
Currently* Close Range
USDCAD 1.2595 1.2560 1.2540-1.2597
EURCAD 1.4256 1.4217 1.4177-1.4244
GBPCAD 1.6986 1.6864 1.6852-1.6977