USD/CAD: rates to rise sooner than later - Nomura

Analysts at Nomura explained that positive momentum in the Canadian economy, typified by the Q2 GDP report, points to the Bank of Canada (BoC) raising interest rates again sooner rather than later.

Key Quotes:

"We have brought forward the timing of our next forecast BoC rate hike and now think the Bank will raise rates at the 6 September policy meeting. With interest rate markets pricing in clos to a 50% probability of a hike in September, initial CAD reactions should be binary.

However, the moves should also be asymmetric, with a rate hike generating a more pronounced positive CAD reaction as expectations for the BoC tightening cycle are ramped up. By contrast, no change should still see an upbeat tone from the BoC, with market pricing for another interest rate hike by year-end set to remain intact, limiting the CAD sell-off."