CAD: Jan hike is a bit too early but solid macro data warrants hawkish tilt - ING

CAD has been on fine form of late – not least due to external factors such as the resilience in oil prices (including a rebound in Western Canada Select crude) and a benign global environment that has favoured high-beta currencies, explains Viraj Patel, Research Analyst at ING.

Key Quotes

“Canadian macro data has also been promising over the past month – with a sharp pickup in various core CPI measures making the upcoming BoC policy meeting (17 Jan) slightly more interesting. While it may be a tad too early for the central bank to resume its hiking cycle, any hawkish signal from Governor Poloz could be seen as teeing markets up for a March rate hike (60% priced in). Industrial production data (today) and the Dec jobs report (tomorrow) may help fuel a small positive re-pricing at the front-end of the CAD rate curve and take $/CAD below 1.25. A hawkish BoC is also why we expect AUD/CAD to move lower (initial target 0.96).”