USD/CAD: Expecting a 50bp BoC hike next week which will help the loonie – MUFG
08.04.2022, 16:04

USD/CAD: Expecting a 50bp BoC hike next week which will help the loonie – MUFG

Expectations of a 50 bp interest rate hike from the Bank of Canada will help the Canadian dollar according to analysts at MUFG Bank. They have a trade idea of shorting USD/CAD at 1.2535, with a target at 1.2150.

Key Quotes:

“The data (jobs report) was consistent with the BoC hiking by a larger 50bps at its meeting next week. The 72.5k gain in jobs reflected job losses in part-time jobs but another hefty increase of 92.7k in full-time jobs. The unemployment rate as a result fell to 5.3%, a new low in the data going back to the mid-1970s. This clearly shows that the labour market in Canada is reaching capacity constraints which will raise concerns over the current monetary stance.”

“The balance between the BoC hiking by 25bps or 50bps is a close call but the market now is positioned slightly more in favour of 50bps and the jobs data coupled with near-term inflation risks and the opportunity to act more aggressively in sync with the Fed, we see a 50bp hike next week. That should keep CAD well supported at a time when we expect crude oil prices to begin drifting higher from here.”
 

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