BoC: Poloz spreads the word on data dependence, CAD softer - Scotiabank

CAD is down vs. the USD in the aftermath of BoC Governor Poloz’s speech as the governor specifically singled out the currency in terms of its impact on inflation and the timing for reaching the 2% target, echoing recent comments from Deputy Gov. Lane, points out the research team at Scotiabank.

Key Quotes

“Policy is not on a predetermined path and considerable uncertainty clouds the economic outlook, the governor indicated.  The comments leave the door open to further rate increases but near-term risks will shift more decisively to the Dec policy meeting (from Oct).  The CAD is under pressure and we will have to allow for the risk of the USD gaining a little more near-term.  USDCAD sellers should consider hedging receivables on USD gains towards 1.25/1.26 and we think USD buyers should hedge payables now.  We remain bearish on the USD from a longer-term point of view, however, and think Canadian institutional investors should remain underweight the USD relative to benchmarks.”