Canadian Dollar: BoC dovish tone and tariff risks – TD Securities

TD Securities’ macro team, including Andrew Kelvin and Jayati Bharadwaj, expects the Bank of Canada (BoC) to adopt a dovish tone and provide limited guidance as trade tensions with the US rise. They see the BoC as sidelined, leaving the Canadian Dollar (CAD) exposed as a funding currency, but still doubt USD/CAD can hold above 1.40 and keep a 1.39 year-end forecast.

Canadian Dollar vulnerable as funding

"BoC will take center stage in the midst of rising trade tensions w/ the US; we look for a dovish tone from the Committee & limited guidance to keep options open."

"BoC meeting likely to take focus after markets look to the Bank to give updates in their thinking after US tariffs."

"Sidelined BoC leaves CAD vulnerable as a funding currency, w/ NOK/ MXN better supported by carry & cleaner macro backdrops."

"Even so, we struggle to see sustained USD/CAD trading above 1.40 in a bearish USD environment & maintain our 1.39 YE forecast."