BTMU FX Strategy Research argues that while a rate hike from the BoC this week is largely in the CAD price, market participants will have to watch closely the updated guidance from the BoC for signals over the likely pace of further rate hikes.
“We still see scope for the loonie to strengthen further in the near-term lowering USD/CAD towards the 1.2500-level if the BoC signals that it plans to follow up with a second rate hike relatively quickly before the end of this year.
The BoC could then slow the pace of tightening if inflation fails to pick up as expected in 2018. Low inflation remains a policy concern as highlighted again by weak hourly wage growth which expanded by an annual rate of just 1.0% in June,” BTMU adds.
Source: BTMU Research
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