BOC to hit the brakes? What does it mean for CAD?

The Canadian dollar is already on the back foot following the poor inflation numbers but struggles to conquer the high resistance level ahead of the BOC. Will USD/CAD jump on the decision? Here are two opinions suggesting that Poloz and co. will take a long break from hiking and this has implications for the C$.

Here is their view, courtesy of eFXnews:

USD/CAD: BoC To Adopt A Wait & See Stance On Wed – Nordea

Nordea FX Strategy Research expects the BoC to adopt a wait-and-see stance at its October policy meeting on Wednesday. 

“Bank of Canada has got the chance to make it three hikes in a row this week. And while the labour market provides BoC a continued scope for policy tightening (Poloz said inflation models are not broken), it will still be a major surprise to see a third consecutive hike.

WIRP gives roughly 20% implied probability of a hike. And as the house price momentum is starting to cool, BoC will likely adopt a wait-and-see stance this week. We are still watching out for the unneglectable risk that Bank of Canada has made a grave policy mistake in firming the policy stance too early.

Bias for higher USD/CAD is intact ahead of New Year,” Nordea adds.

USD/CAD: BoC To Push The Pause Button This Week – BofAML

Bank of America Merrill Lynch FX Strategy Research expects the BoC to remain on hold on 25 October as it waits for the impact of its recent hikes on the economy.

“We expect a dovish statement following recent economic deceleration. We expect BoC to upgrade its potential growth estimate. We expect the BoC to resume its hiking cycle on 2018, with three hikes to put the overnight rate at 1.75% by end-2018,” BofAML adds. 

CAD: continuing to follow BOC and rates

“Interest rates continue to be the current crucial driver in both directions for the Canadian dollar. We saw the most recent test of this after the September inflation numbers when USD-CAD bounced higher.

In this context, we continue to keep our relatively agnostic forecast of 1.30 through the end of next year,” BofAML projects.

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