BoC: Strong data and the oil complex laid the grounds for neutral bias - Westpac

Tim Riddell, Research Analyst at Westpac, explains that the strong performance of Canadian data and the oil complex laid the grounds for a potential shift in BoC bias.

Key Quotes

“Their shift towards a more neutral stance and higher forecasts for 1Q 17 and the remainder of 2017 within their Monetary Policy Report belie concerns that the non-resource sector of the economy remains soft. Although the BoC brought forward the closing of the output gap to 1H 18, their concerns over external (US trade) risks led to firm comments in their press conference about the lack clarity for a sustainable growth path and that “a rate cut isn’t off the table”.”

“This neutral “but” stance of BoC means that the performance of the non-resource sector will be of increasing focus for BoC and markets. This is also tied to US trade developments and so data watching and Trump administration actions are likely to keep USD/CAD range bound but with a bias to trade towards the lower half of its range.”