Fear of rising inflation has been the focus of the markets for the last few weeks. That is why when February inflation in the US came in line with expectations this morning, the markets breathed a sigh of relief, causing stocks to lift again and the US dollar to soften. Inflation will also be in focus when we hear from the Bank of Canada later this morning. This time, the markets will focus on whether and how the Bank gives a nod to the faster-than-expected economic recovery and whether inflationary pressures might persuade it to move up its timeline for raising rates. Currently, the markets expect rates to be unchanged until some time in mid to late 2022. The most likely scenario is that the Bank will not materially change its language from its previous release leaving USD to CAD rates unimpacted. In the unlikely case where we see a shift of emphasis from the Bank of Canada then you can expected the Canadian dollar to strengthen over the course of the day.
Account to Account
