16 Jul 2014
All eyes on the BoC today – Rabobank
FXStreet (Edinburgh) - Senior Currency Strategist Jane Foley at Rabobank underlines the relevance of the BoC gathering due later today.
Key Quotes
“There is little doubt that the BoC will confirm steady rates at today’s policy meeting. More interesting will be the Bank’s take on the inflationary outlook and any sign that policymakers’ dovish commitments could be waning”.
“Based on the findings of last week’s BoC Business Outlook Survey, it seems likely that the Bank may have enough reason to maintain that inflation pressures are not an issue. The Bank states that based on the findings of this survey that “most firms expect inflation to be within the Bank’s 1 to 3 per cent inflation-control range, and almost two-thirds of firms expect inflation to be in the bottom half of that range. Tepid domestic demand and intense competition continue to moderate firms’ expectations for future inflation”.
“Until there is further evidence that growth in the real economy is accelerating, the BoC is likely to remain cautious and unwilling to give the green light to further CAD appreciation. That said, while a dovish tone is likely to be maintained at today’s meeting, the CAD will remain sensitive to the CPI report on July 18. Given the uptick in inflation we see risk of another push lower towards USD/CAD 1.06 this quarter.
Key Quotes
“There is little doubt that the BoC will confirm steady rates at today’s policy meeting. More interesting will be the Bank’s take on the inflationary outlook and any sign that policymakers’ dovish commitments could be waning”.
“Based on the findings of last week’s BoC Business Outlook Survey, it seems likely that the Bank may have enough reason to maintain that inflation pressures are not an issue. The Bank states that based on the findings of this survey that “most firms expect inflation to be within the Bank’s 1 to 3 per cent inflation-control range, and almost two-thirds of firms expect inflation to be in the bottom half of that range. Tepid domestic demand and intense competition continue to moderate firms’ expectations for future inflation”.
“Until there is further evidence that growth in the real economy is accelerating, the BoC is likely to remain cautious and unwilling to give the green light to further CAD appreciation. That said, while a dovish tone is likely to be maintained at today’s meeting, the CAD will remain sensitive to the CPI report on July 18. Given the uptick in inflation we see risk of another push lower towards USD/CAD 1.06 this quarter.