CAD flows: CAD initially rises slightly on BoC decision but remains vulnerable

While the Bank of Canada have cut rates as expected, governor Macklem has taken a cautious tone and the market isn’t pricing in any extra easing at this point, with the BoC still priced to cut twice more this year. While Macklem said that the impact of the US tariff rises was already being felt, and the impact could be severe, he also said that the impact would have both upward and downward effects on inflation, with the initial impact leading to higher prices. USD/CAD has initially edged lower on the decision, perhaps reflecting the lack of any pledge of future near term rate cuts, but we still feel the risks are on the upside for USD/CAD if the tariffs remain in place.