Loonie to benefit if the BoC were to sound more hawkish than the market expects – Commerzbank

The Bank of Canada (BoC) is widely expected to keep rates unchanged at 4.5%. Focus on the statement, Elisabeth Andreae, FX Analyst at Commerzbank, reports.

BoC rate pause likely to continue today 

“It seems undisputed that the BoC will once again keep its key rate unchanged at 4.5% thus continuing its rate pause. The unanimous Bloomberg consensus as well as the OIS rate expectations point that way.

That means attention is therefore likely to focus on the statement and the new monetary policy report with the updated projections.”

“We see a good chance of a hawkish statement in which the BoC refers to the risks for inflation, underlines its willingness to act and keeps the door open for further tightening.” 

“If the BoC were to sound more hawkish than the market expects this is also likely to be reflected in the OIS rate expectations, which would probably benefit the Loonie. Based on these the market is pricing in rate cuts from the autumn. If these were delayed, meaning a shift in expectations for higher key rates for a prolonged period of time that should support the Loonie.”

See – BoC Preview: Forecasts from eight major banks, staying on the sidelines