Bank of Canada meeting: banks’ forecasts

USD/CAD enjoyed a recovery at the beginning of this week. The pair picked to 1.2912 from Friday’s low of 1.2855 hit after the strong Canadian jobs market report. The Bank of Canada monetary policy meeting is the highlight of this week. The BoC’s rhetoric has become hawkish in the past days. This made the markets to almost fully price in the rate hike and further appreciation of the Loonie. Here is banks’ opinion on tomorrow’s rate and monetary policy statements.

TD

The bank’s researchers believe that the Bank of Canada will keep its rate on hold at tomorrow’s meeting. They look for the bank to deliver a hawkish statement instead of raising their borrowing costs. The market is currently pricing in almost 100% of a rate hike. USD/CAD will rise higher once the BOC’s officials fail to provide a rate increase.

Citi

Citi’s analysts note that a rate hike is almost fully priced in by markets. They forecast a “sell on fact” outcome of the Bank of Canada meeting. They noticed the RSI oscillator reached the oversold area. In case of rate increase, the downside will be limited at 1.2764 – 1.2823.

CIBC

The CIBC researchers share the market expectations over the BoC’s rate hike this week. The one factor that can make the BoC’s officials cautious on the timing of any subsequent hikes is the recent appreciation of the Loonie based on prior communications.

BTMU

BTMU analysts anticipate a rate hike tomorrow and recommend traders to watch closely the updated guidance from the BoC for signals over the pace of further rate increases. They see scope for further strengthening of the Loonie towards 1.2500 in USD/CAD if the Bank of Canada signals that a further rate increase will be delivered towards the end of this year. There is a potential of the BoC to slow down its pace of tightening. Inflation rates are still low. This is one of the main concerns of the bank’s officials.

Barclays

Braclays recommend positioning long USD/CAD if the BoC signals a cautious hike path. Subdued inflation figures, low wage growth, and the risk of a plunge in the housing market will likely prevent the Bank of Canada from being super-hawkish. A dovish tone or a signal that the bank is not going to commence a tightening path would trigger USD/CAD rally. In addition, the RSI on the USD/CAD chart reached the oversold area which means that a momentum to the downside is stretched.