BOC’s Poloz Sounded Less Dovish Yesterday, but Canadians Are Not Buying

Yesterday we heard the Bank of Canada Governor Poloz making some comments which didn’t sound too dovish, especially when compared to other statements from the BOC. Below are some of his main comments:

• Poloz said he thinks monetary conditions are ‘about right’
• Canadian economy is in a good place overall
• We’re still quite stimulative where we are today
• We want to do whatever we can to boost trend line
• Starting to see glimmer of response in global easing
• Global financial conditions have eased a lot

But, the Canadian economy has continued to soften, as recent figures have shown. If we only look back into this month, we can see many negative data points. Trade balance remains negative and the Ivey PMI indicator, which shows the health of the economy overall, fell deeper in contraction.

Employment declined by 1.8k, building permits fell by 6.5%, housing starts softened, while manufacturing production declined for the fourth time in the last six months. Today we will get to see the retail sales report. Core sales declined by 0.1% in August, as last month’s declined and are expected to decline further by 0.3% in September.

Headline sales have been declining in three out of the last six four months and they are also expected to decline today. So, I don’t see why Poloz was less pessimistic yesterday. Anyway, another decline today would send the CAD lower and USD/CAD higher.