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In the consensus view, the Bank of Canada is done hiking and will begin cutting rates by mid-2024 – and if you looked at the loonie’s reaction around 10:00 am this morning, it would seem that the central bank’s announcement was in line with that view. But with US Institute for Supply Management numbers landing at the same time and pushing the dollar higher against most of its major counterparts, overnight index swap rates – which Bloomberg uses to guide its famous/infamous WIRP function – might offer a cleaner read. 

To us, it looks as if markets have simply pushed tightening expectations out a bit, suggesting that Macklem & Co. are succeeding in articulating a “higher for longer” view, even as the underlying economy deteriorates. This might create room for some (still modest) loonie repricing ahead.  

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Twists & turns