Loose BoC monetary policy to weigh on CAD
- Last Updated on 09 February 2012
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A worsening global economic background does not bode well for the CAD. Economists have begun to downgrade their 2012 Canadian outlook and GDP forecasts as the gloom from Europe spills over into Canada. This hints that the BoC will loosen monetary policy in Q2 as events outside of Canada begin to influence the local macroeconomic outlook. Continued declines in commodity prices may also have a negative effect on the CAD. Since its peak in April the Thomson Reuters/Jefferies CRB Commodity Index has declined 17.8%. Crude oil prices have risen to close out the year near the $100 level, though any drop in prices will likely limit CAD gains. Perhaps in H2 the CAD will perform well should global growth and risk sentiment bounce back.