CAD: BoC To Match Fed Tightening Going Forward: What's The Trade? – BNPP

BNP Paribas FX Strategy Research notes heading into June, the market consensus was that, with Canada operating under a large output gap, policy tightening would likely be unnecessary for some time – even as the economy grew at or above trend. 

However, BNPP notes that the BoC’s message changed significantly in June, just weeks after its June meeting; and, in its communication that accompanied its July hike, it signalled that it now sees its output gap as substantially closed.

“With growth expected to hold at around or above trend, the implication is that policy hikes will continue going forward. Our economics team expects a series of BoC rate hikes, effectively matching Fed tightening going forward,” BNPP argues. 

In line with this view, BNPP argues that CAD long is an attractive relative value play on the crosses vs. the EUR, AUD, JPY, GBP.

Source: BNP Paribas Research

The article is published by one of the foremost sources of Forex trading information. Link to the original article above.

from eFXNews http://feedproxy.google.com/~r/Efxnews/~3/19NVLrOnNy0/cad-boc-match-fed-tightening-going-forward-whats-trade-bnpp

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