The Bank of Canada (BoC) will hold its first policy meeting of 2024 today. Economists at MUFG Bank analyze USD/CAD outlook ahead of the announcement.

Core inflation pick-up argues against earlier BoC cuts

Core inflation picked up at the end of last year which should make the BoC reluctant to discuss rate cuts as at today’s policy meeting. If that proves to be the case it could disappoint market expectations for earlier BoC cuts and encourage a stronger Canadian Dollar. 

However, we expect any upside for the CAD to be only modest. Any gains for the Loonie could be tempered if there are discussions by the BoC about scaling back quantitative tightening