Bank of Canada rate cut - expect a further 75bp of cuts in the second half of the year

On Wednesday the BoC began its interest rate cut cycle, the BOC's first cut in four years:

• Bank of Canada lowers rates to 4.75% from 5.0%. Full statement from the Bank of Canada

• Q&A from Bank of Canada Press conference: Interest rate decisions are one meeting at a time

Canada is the first G7 country to cut rates. do so.

A response from ING to the decision:

• The Bank of Canada has clearly concluded that diminishing inflation worries and excess supply in the economy mean its monetary policy doesn't need to be quite so restrictive.
• This 25bp move is likely to be followed by a further 75bp of cuts in the second half of the year.
• The Canadian dollar is likely to remain under pressure

And, further out:

• USD/CAD short-term risks are moderately skewed to the upside, but in line with our call for US data to start pointing to a September Fed cut, the pair can still find its way into 1.35 in the second half of the year.

This article was written by Eamonn Sheridan at www.forexlive.com.

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