Any messaging that the BoC can explore ‘fine-tuning’ rate hikes will hurt the CAD – Scotiabank

The Canadian dollar is choppy ahead of key Bank of Canada’s (BoC) decision. Any messaging that the Bank can start to consider ‘fine-tuning’ rate hikes will hurt the loonie, economists at Scotiabank report.

Solid US growth data will cheer USD and stocks

“In Canada, the primary focus will fall on Wednesday’s BoC policy decision, Monetary Policy Report and Governor Macklem’s press conference afterwards. A 75 bps hike is more or less fully priced. This will take the Overnight Target rate to 4.00%. Any messaging that the Bank can start to consider ‘fine-tuning’ rate hikes will hurt the CAD. Whether the Bank’s outlook and still elevated inflation allows the Governor to make that concession at this stage remains to be seen.”

“ It’s a busy week for data release in the US. Thursday’s advance Q3 GDP report is likely to be the highlight of the week. GDP tracking suggests a fairly solid quarter for the US economy after negative prints in Q1 and Q2. The consensus estimate calls for 2.1% (SAAR). The Atlanta Fed’s GDP Now forecast is tacking 2.8/2.9%. Solid growth will be positive for the USD and rates and may weigh on stocks (hurting the CAD).”