The Canadian government has projected that the change in fiscal stance will add 0.5ppt to real GDP growth this fiscal year, notes BTMU.
"At the margin, that reduces the need for further monetary easing but to what extent the BoC believes it alters the outlook will only be known when the Monetary Policy Report is released on 13th April. We do expect the BoC to indicate a brighter outlook, in part due to the budget but also perhaps due to signs that oil prices are bottoming," BTMU argues.
"That reinforces our view that the Canadian dollar is set to gradually advance given our assumption that crude oil prices have bottomed," BTMU adds.
BTMU targets USD/CAD at 1.32, 1.30, and 1.29 the end of Q2, Q3, and Q4 respectively.
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