Previewing the Bank of Canada (BoC) policy meeting, analysts at TD Securities said they expect the bank to reduce purchases of government bonds of Canada (GoC) from $ 4 billion a week to $ 3 billion a week, as reported Reuters.
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“In light of the much stronger-than-expected economic data in the last quarter, there is a risk of a more aggressive statement. We now expect the BoC to raise rates in October 2022.”
“Improvements in taper and growth are expected, but an aggressive surprise in the form of an earlier output gap closing and thus an earlier rate hike could easily jump-start CAD performance. Taken together with well-supported risk sentiment and a pivot in the Treasury market, “We see more room for the USD-CAD to retest its Covid cycle lows with a stiff surprise. We also found an attractive risk / reward to mitigate the rally in the EUR-CAD towards 1.50 “.
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