At present’s Financial institution of Canada assembly has been a really exhausting one to name, ING’s commodity consultants Ewa Manthey and Warren Patterson notice.
A maintain could be accompanied by dovish language
“Consensus was barely favouring a 25bp lower earlier than aligning with market pricing for a maintain over the previous couple of days. The CAD OIS curve at present embeds round 25% chance of a lower in the present day, which to us appears to be like too conservative contemplating the ever-rising draw back dangers to the Canadian economic system, particularly after Trump hiked steel tariffs, which injury Canada greater than some other nation.”
“We expect this assembly is a coin toss. We’re very marginally favouring a lower purely based mostly on the financial justification, however admit that the BoC would possibly ship an excessively dovish sign by chopping when markets are pricing in solely 5bp.”
“Anyway, a maintain could be accompanied by dovish language, and the market’s pricing for the July assembly (-16bp) and year-end (-38bp) each look too conservative to us. The Canadian greenback is one in all our least favorite currencies in the intervening time, additionally contemplating the asymmetrical correlation with US financial woes in comparison with different G10 currencies.”
