Canadian Swap Market Sees 13% Chance of Bank of Canada Rate Cut on July 30 as Inflation Persists, Canadian Dollar Declines

The Canadian swap market currently assigns a 13% probability to a Bank of Canada (BoC) interest rate cut in July, a figure that has remained largely unchanged following recent inflation data releases. Market-implied odds for a rate reduction on July 30 have declined further after the latest inflation report. The Canadian dollar has experienced a slight decline amid these developments, as consumer price index (CPI) data has dampened expectations for easing monetary policy. Persistent inflationary pressures and unexpectedly strong labor market performance have diminished arguments in favor of additional rate cuts since the BoC's decision in June. Despite this, forecasts suggest that the Canadian dollar will strengthen against the US dollar throughout the year, although its appreciation may be constrained by potential BoC interest rate reductions.