BoC: Neutral bias – Westpac

Richard Franulovich, head of FX strategy at Westpac, points out that the BoC struck a neutral bias for yet another meeting, defying expectations for an explicit easing bias.

Key Quotes

“Their statement conveyed a notably more squeamish tone, the bank downplaying the upside surprise in Q2 growth and noting that, “escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies”.”

“The absence of an explicit BoC easing bias and the USD’s less steady tone in the wake of the lousy August ISM will provide USD/CAD with some breathing room to explore lower levels near term. However, rates markets are not getting carried away and neither should USD/CAD. OIS markets are still pricing in more than 80% chance of a BoC rate cut by their December 2019 meeting.”

“US survey data underscore risks of a weaker Canadian growth path into year’s end. USD/CAD has room down to 1.3100- 1.3150 but the underlying choppy uptrend from Q4 2017 remains intact.”