Barclays Capital Research argues that the BoC’s outlook seems overly optimistic, and the pace of normalization is likely to be data-dependent, with wage and price inflation in particular closely monitored.
“We expect an additional hike in Q1 18, although the upbeat BoC outlook has increased the probability of early action,” Barclays projects.
“Although central bank hawkishness supported CAD last week, the USDCAD relative strength index indicates the pair is oversold and momentum to the downside looks stretched.
We continue to expect CAD weakness over the coming months as a subdued inflationary outlook does not imply a more aggressive rate hiking cycle relative to current market pricing, and forecast USDCAD to reach 1.33 by year-end,” Barclays adds.
Source: Barclays Research
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