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- BoC Preview: Two scenarios and their implications for USD/CAD – TDS
BoC Preview: Two scenarios and their implications for USD/CAD – TDS
Economists at TD Securities discuss the Bank of Canada (BoC) Interest Rate Decision and its implications for the USD/CAD pair.
Dovish (20%)
Hold at 4.75%. BoC leaves rates unchanged despite upward revisions to GDP/CPI in July MPR. Statement cites further erosion of BOS/CSCE and expected return to below-trend growth in Q2. Core inflation momentum still elevated, but headline getting closer to target. Forward guidance left unchanged as Bank keeps the door open to hikes. USD/CAD +1.15%.
Base-Case (80%)
Hike to 5.00%. BoC delivers another 25 bps rate hike, citing substantial upgrades in July MPR. Tightening is required to ensure inflation does not get stuck above target, especially with a larger output gap in Q1. Statement cites some progress on capacity pressures and wage growth but leaves guidance open-ended. USD/CAD -0.25%.
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