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QT In Fairly Short Order After Rate Hike

CANADA
  • USDCAD is back above where it was before Macklem started speaking, having dipped on a prepared statement that was very similar to last week’s decision, although part of the move is broader USD strength.
  • At 1.2675 it’s up from 1.2653 but remains reasonably close to the first support of 1.2650 (Jan 26 low) tested earlier. Clearance here would open firm support at 1.2560 (Jan 26 low).
  • More recent comments have been “Primary instrument for tightening is interest rate… balance sheet rolloff works further out on yield curve… and QT could come in fairly short order after rate hike”.
  • Previous guidance from last week was that “The Bank will keep its holdings of GoC bonds on its balance sheet roughly constant at least until it begins to raise the policy interest rate. At that time, the Governing Council will consider exiting the reinvestment phase and reducing the size of its balance sheet by allowing roll-off of maturing GoC bonds”.

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