BoC to leave rates unchanged – TDS

Analysts at TDS suggest that all eyes today will be on the Bank of Canada’s 10:00 ET rate decision, where the market is pricing in a 40% probability of a surprise rate hike to 1%.

Key Quotes

“While TD expects the Bank to leave rates unchanged, a view shared by 21 of the 27 economists surveyed by Bloomberg, the policy statement should still convey an upbeat tone in recognition of the improvements in the Canadian economy since July.”

“On the data front, we will be watching international merchandise trade for July to get an update on Q3 GDP tracking. TD looks for the deficit to narrow modestly to $3.30bn from $3.60bn in June, which is in line with the market consensus. Our forecast assumes a pullback in both import and export activity as the rapid appreciation of CAD weighs on cross border trade. Labour productivity for Q2 will be released simultaneously at 8:30 ET.”

“US: ISM Non-manufacturing for August will highlight a number of mid-tier releases and the market looks for the index to post a partial rebound to 55.5 from 53.9. International trade for July will be published alongside the Canadian report and here markets expect the deficit to deteriorate modestly to $44.7bn from $43.6bn, in line with the widening in the advance goods trade report. Lastly, the Fed’s Beige Book will give an update on regional economic activity ahead of the September FOMC.”