Canada: Economic uncertainty looming – Westpac

According to Richard Franulovich, Research Analyst at Westpac, it’s an uneven data of late for Canadian economy with inflation and retail sales showing only modest progress, though Feb GDP was solid at +0.4% and that firmer momentum seems to have extended into March with a big +1.4% uplift in manufacturing sales.

Key Quotes

“The BoC will likely leave rates at 1.25% next week amid that uneven data, and last minute wobbles in NAFTA negotiations. Markets in any case lean strongly in favour of a hike at their subsequent July MPR, pricing in a 76% chance of a hike.”

“CAD could see some mild disappointment selling if the BoC is on hold next week (a modest 25% probability for a hike is priced in) but weakness shouldn’t last long given solid energy price trends and the presence of a reasonable short CAD spec position.”