There is a key line in BOC Governor Macklem’s opening statement

Bank of Canada Governor Tiff Macklem is set to speak momentarily but the BOC has already published his opening statement.

It highlights a stance that’s more-neutral than the market anticipated.

“Absent the threat of tariffs, the risks to the inflation outlook are roughly balanced,” Macklem says.

Now the tariffs are a huge asterisk but there is a fair chance that we come out of the weekend with no tariffs and a much clearer picture on Canada-US trade (I think they move up the USMCA re-neogotiations to this summer). That BOC in a neutral stance would require something of a repricing in markets as 42 bps of easing are currently priced in.

Now the uncertainty won’t go away with Trump so you could make cut out 15 bps of easing but there are some real upside risks to the loonie in the short term, rather than the one-way move we’ve had for months.

Macklem also highlights a pickup in several parts of the economy.

There are signs economic activity is gaining momentum as past interest
rate cuts work their way through the economy. Lower borrowing costs are
boosting activity in the housing market as well as consumer spending on
big-ticket items like automobiles. The pickup in household spending is
starting to broaden to other consumer items and is projected to
strengthen further. Business investment has been weak, but is forecast
to increase gradually. And the outlook for exports is being supported by
new export capacity for oil and gas.

That doesn’t sound like someone eager to cut much more.

Watch Macklem live here:

This article was written by Adam Button at www.forexlive.com.