“Yesterday’s inflation data for April is unlikely to be to the Bank of Canada’s taste . The overall rate on the other hand rose slightly to 4.3%. As we mentioned yesterday, the BoC expects an inflation rate of 3.3% on average in Q2.”
“Yesterday’s inflation data provided notable momentum for rate hike expectations on the market, which also benefitted the CAD at least temporarily. However, the OIS rate expectations signal that the market only prices in a 50% chance of a further 25 bps rate step in the summer . That the market is only partially betting on a further rate hike is probably also due to the fact that the threshold for this step is likely to be reasonably high.
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