Later today, we have the Bank of Canada policy meeting. Economists at MUFG Bank do not expect a big reaction on the CAD unless the BoC explicitly signals a pause.
Approaching terminal rate?
“While we believe there is a good chance today’s 25 bps hike could be the last, we are less sure that the BoC will be willing to give explicit guidance on that today. There should be enough ‘between the lines’ for the markets to conclude a pause is more likely but we perhaps should not expect that view to be expressed explicitly.”
“An explicit signal of a pause would certainly weaken CAD but with the Fed decision a week away, we doubt we see a big reaction to a communication that does not include an explicit pause reference.”
“We continue to expect CAD to underperform more generally as the US Dollar weakens. The Canadian economy is more vulnerable to a period of sustained higher rates and that is likely to undermine appetite for CAD.”
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