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“We expect the BoC will leave the overnight rate unchanged at next week’s meeting, which is in line with market expectations,” TD Securities analysts note.

Key quotes

“The communique should be fairly short, and while the Bank will note that weaker commodity prices present a headwind to the outlook, we expect that they will again warn that higher interest rates will be needed.”

“The biggest question mark will be around the Bank’s treatment of the energy shock. Lower oil prices will materially suppress Q4 growth, and even if the impact is expected to be transitory markets will be looking for reassurance that a January rate hike is still a realistic possibility. If the Governor sounds overly concerned about falling oil prices, there is a risk that rates markets could rally sharply.”

“The loonie reaction boils down the local versus the global story. A cautious BoC should reaffirm CAD weakness on the crosses and yet we think much of the rally in USDCAD reflects the building expectations that much of the good news was priced in. Our framework argues that USDCAD is trading mostly where it should, though the critical point is that CAD functions as a risk asset these days – not just a monpol play. That means the outcome from the G20 on broader sentiment could matter as much or more than the BoC next week. As a consequence, we like fading USDCAD in the 1.33-1.34 zone even though we prefer holding CAD shorts against GBP and NOK.”