For the second time in a row, the Bank of Canada cut interest rates by 50bp.
This is the most aggressive move that we have seen from the central bank since September 11th. The CAD dropped like a hard rock following the rate decision because not only did the BoC cut rates, but they also warned of more to come. Weaker growth domestically, fears of further spillover effects from the US economy as well as tight credit conditions are the central bank’s primary concerns. The only reason why the CAD reversed its move was because of the rise in oil. Sooner or later Canadian fundamentals will come back to the forefront. Retail sales are due for release tomorrow and we expect them to be weak given the sharp decline in wholesale sales. Meanwhile, Australia will be reporting consumer prices. After the hottest producer price growth in 10 years, consumer prices should also follow suit.