The BoC stuck to its clear and already well known script this week – further hikes will be required over time but the Bank will be cautious - yet USD/CAD saw an outsized reaction, notes Richard Franulovich, Research Analyst at Westpac.
“Suspect markets have overreacted.”
“Encouragingly, key releases have begun to surprise on the upside – GDP, trade and jobs, matching the signals from our very depressed data pulse (i.e. all the bad news is out).”
“Our base case is still intact: risks to both the BoC and consensus projection for 2.1% growth next year are to the upside given Trudeau’s fiscal stimulus is still washing through the economy, US growth prospects are firm and oil prices are at 2 ½ year highs.”
“1.30 should offer stiff resistance on the topside and the BoC could easily deliver at least +50bp in hikes in H1 next year, more than what is priced in.”
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