BOC Adds Another Reason for the CAD to Rally, After Oil Output Cut

Early this morning, the USD was continuing the advance that we saw last Friday and the CAD was slightly weaker against the USD, but it was stronger than most of the other main currencies, which was a bullish sign. This was due to the surprise announcement by Oil producing nations of a production cut, which is expected to have a significant impact on global economy, especially those countries struggling with high inflation such as Europe and the US.

The CAD has benefited from the rise in Oil prices, which are positively correlated to this currency. Now, as the odds for further FED rate hikes beyond May have diminished, as inflation slows, as shown by the softer PCE price index on Friday and lower ISM manufacturing prices earlier today. Besides that, the Bank of Canada survey is showing recession fears for 2023 diminish in Canada, which is giving the CAD another push, sending USD/CAD lower.

The Bank of Canada (BOC) should feel positive about the trend of inflation expectations. There is no apparent reason for them to alter their position.