TD Securities Sees Dovish Tone Ahead of BoC Meeting Amidst Trade Tensions

TD Securities' macro team is anticipating a dovish tone from the Bank of Canada (BoC) as trade tensions with the US rise. Andrew Kelvin and Jayati Bharadwaj expect the BoC to provide limited guidance, allowing options to remain open.

The Canadian Dollar (CAD) may be vulnerable as a funding currency, but TD Securities struggles to see sustained USD/CAD trading above 1.40 in a bearish USD environment. They maintain their year-end forecast of 1.39 for USD/CAD.

With the BoC taking center stage amidst rising trade tensions, markets are looking for updates from the Committee on their thinking after US tariffs. The sidelined BoC leaves the CAD exposed as a funding currency, but TD Securities sees NOK and MXN as better supported by carry and cleaner macro backdrops.