Poloz Warns of NEGATIVE first quarter results; QE may be warranted!

In an interview over the weekend Bank of Canada Stephen Poloz warned that the first quarter of 2015 will look artocious for the Canadian economy as a result of the oil shock.

Poloz already unexpectedly cut interest rates in January thanks to oil’s crash but mentioned that the bank has and will continue to navigate the current environment with a slew of options including so-called forward guidance (a plegde to hold rates low for a long time), asset purchases and also another rate cut.

The good news Poloz said is that the sharp decline in the loonie has seen US investments “starting to fire on all cylinders” and manufacturing is rebounding.

Markets are focused on the Canadian Gross Domestic Product data for January due out tomorrow.  The loonie has a significant risk of weakening further if the printed figures are weaker than the expected 0.2% decline.

The loonie is currently trading at 1.2650 with the pair looking to test the 1.27 level and possibly test higher lows.

Expect a volatile session over the coming days on the USD/CAD.