Ned Rumpeltin, the European head of FX strategy at TD Securities, notes that the overwhelming consensus is that the Bank of Canada (BoC) to keep rates unchanged at 1.75% today.
- “In terms of the details, we think the changes to the BoC’s forward guidance will be limited. Policymakers will need to balance the strong domestic economic data seen recently against growing global uncertainty. Interestingly, we think they may be approaching a crossroads in their communication strategy.
- In the April MPR, they presented a very cautious profile for economic growth. They stated they were paying special attention to developments in household spending, oil markets, and international trade tensions. We are about to find out how the Bank will manage the trade-offs between and among these factors. In particular, we expect them to state that domestic conditions have improved but global uncertainty is weighing on growth projections. At this stage, data dependence will remain paramount. This all should translate into a fairly mild reaction in both rates and FX markets, which may look more to Powell for inspiration unless we get a very clear directional push from the BoC.
- We think we could see a touch of upside risk in USDCAD on a move above resistance at 1.3151, but we think 1.3200/30 may cap if our base case is confirmed. That said, we think CAD longs are starting to look a bit crowded.”