GoCs Rally 8bp and USDCAD Jumps On Dovish BoC

GoC yields have fallen 7-8bps for 2-10Y tenors, 5bps for the 30Y since the BoC decision to hike 25bp but signal a pause if developments play out as expected. USDCAD off highs but currently circa 70pips higher at ~1.341 having dipped ahead of the meeting, but for the most part has remained within the week’s range. Press conference follows in 45mins.

• Broadly dovish inflation language: monthly core inflation suggests core has peaked rather than last month's statement that early indicator price pressures may be losing momentum. Short-term inflation expectations are still seen as remaining elevated but it removes the line that the longer this remains the greater the risk high inflation becomes entrenched.
• Further, within the MPR, “Slower demand growth, combined with improvements in the supply chain, lead the economy into modest excess supply in 2023.”