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Sam Bonney, Research Analysts at Nomura, suggests that they are sticking to their view that the BOC will leave rates unchanged at Wednesday’s meeting.

Key Quotes

“While the top-line data look good cracks are showing. We are starting to see further signs that consumption and credit growth is moderating. Meanwhile, NAFTA and US trade policy remains uncertain. Together, these factors should see the BOC stand pat this week.”

“An unchanged rates decision should not surprise the market or consensus. Recent BOC meetings have not provided much FX volatility. Following disappointing inflation and retail sales data, the market has almost ruled out the possibility of a hike this week (just 4bp priced). As a result, we do think CAD depreciation risks around this week’s meeting may be more limited.”

“We expect the BOC to stick to its cautious tone, but see a risks it tries to guide the market towards a July hike. Headline inflation rising rapidly (energy base effects could add ~67bp by July) and oil price strength should provide tailwinds for the market to price in a July BOC hike. July pricing has also been reduced to 17bp, too low in our view.”