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Jun 06 - 06:55 PM

ING: CAD Outlook Following BoC Rate Cut

By eFXdata  —  Jun 06 - 03:00 PM


ING provides an analysis of the Canadian dollar (CAD) following the recent 25 basis points rate cut by the Bank of Canada (BoC). Despite the cut, the CAD exhibited limited and short-lived weakness. ING explores the factors behind this resilience and shares their forecast for the CAD against other G10 currencies.

Key Points:

  1. Market Reaction to BoC Rate Cut:

    • The BoC's 25bp rate cut was largely anticipated by the markets, which had priced in 20bp ahead of the announcement.
    • The BoC emphasized data dependency and acknowledged ongoing inflation risks, which helped contain the FX impact.
    • CAD had already weakened against other commodity currencies leading into the meeting, contributing to the limited reaction.
  2. Future Rate Cuts:

    • ING predicts an additional 75bp in rate cuts by the BoC in the second half of 2024, more dovish than the market's expectation of 50bp.
    • Markets may be underestimating both the potential for more easing by the Fed and the BoC's willingness to move independently.
    • BoC Governor Tiff Macklem's statement about taking decisions "one meeting at a time" suggests that further rate cuts could occur as early as July, though September seems more likely.
  3. Comparative Currency Analysis:

    • ING views CAD as the least attractive among G10 commodity currencies.
    • Other currencies like NOK, AUD, and NZD benefit from more hawkish domestic central banks, are more undervalued, and are expected to rally faster if USD rates decline this summer.
    • In contrast, CAD's outlook is less favorable due to the BoC's dovish stance.
  4. USD/CAD Projections:

    • ING's forecast for USD/CAD suggests a potential move lower, with expectations for the USD to underperform against other currencies this summer.
    • A drop below 1.35 for USD/CAD is anticipated in the second half of 2024, aligning with ING's call for the Fed to cut rates.


ING maintains a cautious outlook for the CAD following the recent BoC rate cut. Despite limited immediate weakness, the CAD is expected to underperform other commodity currencies due to the BoC's dovish stance and potential further rate cuts. ING sees USD/CAD moving below 1.35 in the second half of 2024, driven by expectations of USD underperformance and further BoC easing.

ING Research/Market Commentary


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