The Bank of Canada (BoC) lowered the target for the overnight rate by 25 basis points in July. A soft landing scenario for the Canadian economy is not a foregone conclusion, NBC FX analysts Stéfane Marion and Kyle Dahms note.

Global economic growth weighs on the price of commodities

“For the second time in as many meetings, the Bank of Canada lowered the target for the overnight rate by 25 basis points in July. Driving the decision to cut was ‘broad price pressures continuing to ease’ and ‘ongoing excess supply lowering inflationary pressures’.

“In our view, a soft landing scenario for the Canadian economy is not a foregone conclusion. If incoming data soften more in line with our outlook, there will be a strong case for another cut in September.”

“At this stage, we still see USD/CAD rising above 1.40 in the coming months as weaker global economic growth weighs on the price of commodities.”