21 Jan 2015
BoC expected unchanged, USD/CAD might target 1.22+ near-term – TDS
FXStreet (Barcelona) - Shaun Osborne Chief FX Strategist at TD Securities, expects BoC to keep the rates unchanged in today’s meeting, and further forecasts USD/CAD to test 1.22+ levels in the near-term with the broader trend remaining higher.
Key Quotes
“We look for the BoC to maintain the target for the overnight rate at 1% today but the meeting’s outcome is still of prime interest for investors who will be more concerned about how far the Bank thinks the decline in energy prices is pulling it away from its policy objectives and what impact this might have on the Bank’s policy outlook.“
“We look for a dovish-sounding statement which acknowledges the weaker growth outlook but expectations of anything more may prove to be wide of the mark. We think it is too soon for the Bank to adjust the balance of risks around the outlook from neutral—especially as the weaker CAD is providing a big offset to the oil price shock.”
“Unchanged policy and no overt easing bias may provide the CAD with a modest lift—a la JPY and the BoJ overnight—given how the domestic money markets have started to move to factor in the risk of rate cuts in the past week or two. But CAD gains are likely to be limited and short-lived in nature—we would look to fade any dip in USDCAD near-term.”
“The broader trend remains higher overall and we expect USDCAD to test 1.22 in the near-term before the risk of a more extensive consolidation increases.”
“If the BoC does disappoint very dovish expectations, we look for USDCAD to dip briefly but the underlying message of economic softness will help underpin the broader bull trend in funds; look to fade short-term weakness is USDCAD; we expect the market to press on towards 1.22+ near term.”
Key Quotes
“We look for the BoC to maintain the target for the overnight rate at 1% today but the meeting’s outcome is still of prime interest for investors who will be more concerned about how far the Bank thinks the decline in energy prices is pulling it away from its policy objectives and what impact this might have on the Bank’s policy outlook.“
“We look for a dovish-sounding statement which acknowledges the weaker growth outlook but expectations of anything more may prove to be wide of the mark. We think it is too soon for the Bank to adjust the balance of risks around the outlook from neutral—especially as the weaker CAD is providing a big offset to the oil price shock.”
“Unchanged policy and no overt easing bias may provide the CAD with a modest lift—a la JPY and the BoJ overnight—given how the domestic money markets have started to move to factor in the risk of rate cuts in the past week or two. But CAD gains are likely to be limited and short-lived in nature—we would look to fade any dip in USDCAD near-term.”
“The broader trend remains higher overall and we expect USDCAD to test 1.22 in the near-term before the risk of a more extensive consolidation increases.”
“If the BoC does disappoint very dovish expectations, we look for USDCAD to dip briefly but the underlying message of economic softness will help underpin the broader bull trend in funds; look to fade short-term weakness is USDCAD; we expect the market to press on towards 1.22+ near term.”