Outline: The Bank of Canada is supposed to convey another 50bps rate climb as had been recently recommended considering raised expansion and a vigorous economy. In the meantime, the going with articulation is probably going to emphasize that further fixing of money related arrangement will be required.
WHAT Value is PRICED Into? As it stands, OIS markets are estimating in 55bps worth of fixing, thusly, while there is a 20% likelihood of a 75bps move, the base case is for the Bank to stay with 50bps increases. In this manner, the bar has been set high for the BOC to exceed expectations on the hawkish front, really intending that there is a gamble of some mistake for CAD as market members marginally loosen up wagers of a 75bps move.
BOC Rate Expectations
|
CHANGE IN |
LONGS |
SHORTS |
OI |
|
DAILY |
8% |
-5% |
3% |
|
WEEKLY |
43% |
-7% |
20% |
With the month-end noise now out the way, where we have seen a sizeable rally in risk sentiment alongside a pullback in the US Dollar. From a positioning standpoint, this is a lot cleaner with USD/CAD testing key support in the form of its 200DMA. Concerns over the global growth picture will persist in the near term and thus the bias is still for USD to find support on dips and equity rallies to be sold into.
