Canadian Retail Sales On Wednesday May Be The First Wake-Up Call

The Bank of Canada signaled about hike rates possibility earlier than expected and decided to adjust the program to a target of $3 billion weekly net purchases of Government of Canada bonds, which means a 25% cut. Despite the spread of Covid-19, the BoC positively assessed economic prospects and bet the current vaccination pace will help neutralize negative effects of the pandemic third wave. (As of April 23rd, 24.21% of the population received at least one dose and only 2.37% received two doses.)
Following the Bank of Canada decision, CAD strengthened against major currencies.

This decision affected the bond market first, causing a slight increase in the 10Y bond yield to 1.559%. This growth was short-lived, and the yield stabilized over the following days at 1.520%. The bond purchase program cutback implies a gradual rise in yields. In the future, it may lead to the spread between 10-year Canadian and U.S. bonds above zero. This will put pressure on the USDCAD pair, provided the U.S. Treasury yield does not rise.

The Consumer Price Index (CPI) rose 2.2% on a year-over-year basis in March, up from a 1.1% gain in February. According to Statistics Canada: “A significant proportion of this increase was attributable to a steep decline in prices in March 2020, as the monthly CPI rose 0.5% in March 2021.” On a monthly basis, CPI rose 0.5%; Core CPI rose 0.3%.

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Disclaimer: This material contains general commentary only and is not intended to constitute or be relied upon as personal financial advice. To the extent that this material contains any general ...

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