The outlook for the CAD has decisively shifted lower in the weeks and months ahead – TDS

The Bank of Canada (BoC) delivered a dovish surprise with a 50 bps rate hike in October. The CAD weakened following the dovish surprise. Economists at TD Securities believe that the loonie’s outlook has significantly downshifted.

BoC dials back tightening pace

“The BoC hiked by 50 bps in October, delivering a dovish surprise to the market consensus for a 75 bps move. The policy statement maintained the Bank's previous guidance that rates will need to move higher still but also alluded to the softer growth outlook as higher rates feed through to interest-sensitive parts of the economy.” 

“We look for 25 bps hikes in December and January, with a terminal rate of 4.25%. We previously expected the BoC to hit its 4.25% terminal rate in December.”

“We have held a bearish view of CAD since June and we remain resolute in that view especially now that the BOC has signaled the worst is yet to come.”

“We think the outlook for the CAD has decisively shifted lower in the weeks and months ahead.”