Back
15 Apr 2015
BoC rate meeting to be CAD supportive – BTMU
FXStreet (Barcelona) - With BoC set to hold its policy meeting today, Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, views that the central bank might convey that the January rate cut served its purpose of limiting the downside to the economy, which along with stable oil prices might be CAD supportive.
Key Quotes
“Today, the Bank of Canada will hold its regular meeting and release its quarterly Monetary Policy Report. We like the majority of the market do not expect any additional monetary easing today.”
“While the data from Canada has certainly highlighted the negative hit to the economy from the drop in crude oil prices, the flow of data hasn’t been as bad as many had feared and we suspect that’s a message we may get today from the BOC. So we would be inclined to say that the BOC will convey a message more along the lines that the “insurance” rate cut in January served the economy well in limiting the degree of downturn. This of course would imply that perhaps the January cut was a one-off.”
“Downside risks certainly prevail though, and the BOC will also emphasise that in order to give them the flexibility of moving again, say if crude oil prices were to fall back again. The projections on the last MPR assumed a crude oil price of USD 60 – we see no reason for that to change today.”
“Out short-term USD/CAD regression model indicates that spot is a bit higher than where it should be given that the 2-year swap spread has been moving in favour of the Canadian dollar. Also crude oil prices are drifting higher, which combined will help keep the Canadian dollar well supported. The BOC message today may also help.”
Key Quotes
“Today, the Bank of Canada will hold its regular meeting and release its quarterly Monetary Policy Report. We like the majority of the market do not expect any additional monetary easing today.”
“While the data from Canada has certainly highlighted the negative hit to the economy from the drop in crude oil prices, the flow of data hasn’t been as bad as many had feared and we suspect that’s a message we may get today from the BOC. So we would be inclined to say that the BOC will convey a message more along the lines that the “insurance” rate cut in January served the economy well in limiting the degree of downturn. This of course would imply that perhaps the January cut was a one-off.”
“Downside risks certainly prevail though, and the BOC will also emphasise that in order to give them the flexibility of moving again, say if crude oil prices were to fall back again. The projections on the last MPR assumed a crude oil price of USD 60 – we see no reason for that to change today.”
“Out short-term USD/CAD regression model indicates that spot is a bit higher than where it should be given that the 2-year swap spread has been moving in favour of the Canadian dollar. Also crude oil prices are drifting higher, which combined will help keep the Canadian dollar well supported. The BOC message today may also help.”