The Canadian Dollar — quite literally — can’t be stopped! The prized outcome so far has been winning against the US Dollar for three consecutive days, largely catalyzed by soaring oil prices and sustained decline in the US Dollar. It’s the latest sign investors are moving on to looking ahead at the economy. They are very much focused on the decisions from the Bank of Canada (BoC) and US Federal Reserve.
The Bank of Canada is set to release its latest monetary policy decision on Wednesday, June 4, 2025, at 13:45. The BoC’s arbitrary rate release schedule is usually quite a bit in advance, so this upcoming announcement will be very relevant for all market participants. The reasons for this are clear. Economists are in wide agreement that the central bank will hold its key interest rate steady at 2.75%. In fact, this rate has not been updated in decades.
Recent economic data paints a rosy portrait for their northern neighbor while telling a much different story in the U.S. In Canada, the manufacturing PMI increased moderately to 46.1 in May. This bump is indicative of some rebound and strength within the industry, despite continued hardships plaguing the sector. The May US ISM Manufacturing PMI – released on Friday – dropped to 48.5 from 48.7. This was the deepest contraction since November 2024, falling short of market expectations.
As market attention increasingly turns towards inflation risk, investors are moving quickly to get ahead of the market. They price in a 75% probability that the Bank of Canada will hold rates unchanged at 2.75% at its next meeting. The latest figures indicate that Canada’s GDP growth was 2.2% in the first quarter of the year, suggesting a moderate yet stable economic environment.
One well-known Derek Holt of Scotiabank has deep skepticism about any soon-coming BoC rate cuts. He is adamant that the current economic conditions do not warrant such a decision.
“No way the BoC should be cutting any time soon, if at all.” – Derek Holt
Holt’s negative take on “Build Back Better” raises some serious scare concerns about scary inflation. What the economy has is modest visible slack… but that’s not what’s holding core inflation at 5%+.