On Wednesday, the Bank of Canada (BoC) will announce its decision on monetary policy. A rate hike of 50 bp is widely expected. According to analysts from TD Securities, the most likely scenario is a 50 bp hike and the beginning of quantitative tightening in May. They see the central bank revising to the upside GDP and inflation forecasts. They look for a “hawkish” policy statement.
Key Quotes:
“We look for the BoC to lift rates by 50bps, announce QT beginning in May, and signal that more hikes will be needed. We also look for material upward revisions to 2022 GDP and inflation forecasts.”
“Our high-frequency fair value framework pegs USDCAD at 1.25, underscoring the anchor of the current range. We prefer to fade extreme moves on both sides, where a bounce towards 1.28 would offer selling opportunities. For now, CAD crosses offer better opportunities, and we maintain our short NZDCAD exposure.”