BoC Dovish Tone May Not Be Enough to Support CAD Amid Trade Tensions

The Bank of Canada (BoC) is set to take center stage as trade tensions between the US and Canada rise. According to TD Securities' macro team, Andrew Kelvin and Jayati Bharadwaj expect a dovish tone from the BoC, with limited guidance provided on future monetary policy decisions.

The BoC's meeting is likely to be a key event for markets, as investors seek updates on the bank's thinking following US tariffs. The Canadian Dollar (CAD) may face increased volatility due to its role as a funding currency, but TD Securities still doubts that USD/CAD can hold above 1.40.

In their forecast, TD Securities maintains a year-end target of 1.39 for the USD/CAD exchange rate, despite the CAD's exposure as a funding currency. The bank's dovish stance may provide some support to the CAD, but its overall outlook remains uncertain in the face of rising trade tensions.