BoC: Pricing for further rate rises softens - Westpac

Sean Callow, Research Analyst at Westpac, points out that no economists forecasted another BoC hike this week but the statement still sparked a 1% fall in CAD.

Key Quotes

“The Bank projected softer GDP growth into 2018, focused on soft wages growth and concluded that it “will be cautious in making future adjustments to the policy rate.”

“Pricing for a hike by Dec is now about ⅓, down from ½ a month ago. But the tightening bias remains intact, with PM Trudeau’s 2016 fiscal stimulus still flowing through the economy, US growth prospects firming and oil prices holding near multi-month highs.”

“Given large net long CAD leveraged fund positioning (62k contracts), near term risks on USD/CAD lie to the topside (say 1.29) if USD finds support on Fed chair choice. But year-end 1.24 projection can be reached on US struggles with tax reform.”