Christian Lawrence, Senior Market Strategist at Rabobank, fully expects the Bank of Canada to leave rates on hold at 1.25% today.
Key Quotes
“20 of 23 analysts surveyed by Bloomberg expect no change and the OIS market implies an 18% chance of a 25bp hike. We do not expect the Bank to hike rates again this year although there is significant risk of a July move if data allow.”
“OIS implies a 73% chance of a 25bp hike in July and a 92% chance of a hike by year end.”
“We expect domestic activity data will continue to sour and that price pressures will ease as we head into H2 which will prevent the Bank from hiking.”
“This meeting will be accompanied by a new Monetary Policy Report containing the Bank of Canada’s new growth and inflation forecasts.”
“NAFTA remains a key risk but the market seems to be trading as if an agreement is likely to be forthcoming in the coming weeks and this remains our base case.”
“USD/CAD completed the head and shoulders formation we highlighted a few weeks ago which provided a target of 1.2508. USD/CAD touched a low of 1.2545 and has traded a range between that and the 200dma at 1.2625 over the past four sessions. Oil remains supportive.”
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