USD/CAD: Rate hike next week from BoC to have limited impact – TDS
26.05.2022, 16:00

USD/CAD: Rate hike next week from BoC to have limited impact – TDS

Next week, the Bank of Canada (BoC) will have its monetary policy meeting. Market consensus is for another 50 basis points rate hike to 1.50%. According to analysts from TD Securities, global factors remain a crucial driver of the Canadian dollar, likely limiting the impact of the rate hike from the BoC.

Key Quotes: 

“We look for the Bank to deliver another 50bp hike in June to bring the overnight rate to 1.50%. With little uncertainty around the decision itself, the focus will shift to the policy statement where we expect a hawkish tone. The Bank will note that growth and inflation are both tracking above the April MPR, and repeat that rates will need to rise further.”

“Global factors remain a crucial driver of the loonie, likely limiting the impact of the BoC's anticipated 50bp rate hike. As a result, we expect USD/CAD to maintain the 1.26-1.30 range through the summer months but will look to fade extremes. For now, CAD is more attractive to trade tactically on the crosses where we remain short versus NOK and like scaling into short exposure versus AUD.”

“A 50bp move is broadly expected, but the accompanying tone could impact front-end rates on the margin. A hawkish statement would reinforce the index-related flattening which we see as the dominant event in CAD markets on June 1.”
 

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