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The Canadian dollar has managed to maintain strength against the USD in a week with little Canadian specific economic data. Last week’s Bank of Canada (BoC) rate announcement saw Governor Macklem leave the door open to additional hikes should incoming data necessitate. Subsequently, the local balance of trade and labor reports outlined the economies resilience and sustained upside pressures on inflation from an average earnings lens. Higher crude oil prices are also favorable for the CAD while supplementing the inflation narrative that could prompt the aforementioned hike early next year. This is reflected in BoC interest rate expectations (refer to table below) which have been ‘hawkishly’ re-priced to suggest a 10bps peak from 5bps just last week.

BANK OF CANADA INTEREST RATE PROBABILITIES