BoC: Market pricing 50% chances of rates going up this year - SocGen

Last Friday, the front end of the Canadian rates market priced a 30% chance that rates would go up this year and one speech from BOC Senior Deputy-Governor Carolyn Wilkins later, and pricing is over 50%, according to Kit Juckes, Research Analyst at Societe Generale.

Key Quotes

“She cited broadening growth across sectors, a reduced drag from soft oil prices and solid Q1 growth as reasons for optimism. What is striking isn’t so much the tone however as the market reaction. That reflects underlying CAD bearish views and positioning and a sensitivity therefore to any upbeat news or signs of hawkishness. We think CAD is the cheapest of the four G10 dollars, and it’s that valuation that gives it room to rally further over time (albeit probably after a pause now).”

“The wider significance of the BOC move is that the reaction to anything hawkish from central bankers outside the US will trigger a bigger reaction than anything they say that is dovish at the moment.”