Later, the Bank of Canada (BoC) will announce its policy decisions. According to Elisabeth Andreae, a currency analyst at Commerzbank, what is likely to be decisive for the CAD is the degree of bullying the market will perceive in the BoC and, above all, whether rate cut expectations will be lowered by the end of 2023.
How tough will the Bank of Canada be today?
“The CAD is likely to receive short-term support if the Bank of Canada surprises with a 50 basis point rate hike. It’s not our main stagebut it does not seem impossible given the robustness of the economy and the stubbornly high underlying inflation rate.”
“A 25bp rate hike, as generally expectedand an aggressive rate outlook is likely to support the CAD at best.”
“If the BoC signals that it will take a breather after the last rate hike, it is likely that the market interpreted it as the end of the current rate hike cycle. This is likely to curb rate hike fantasies and consequently put pressure on the CAD.”
Source: Fx Street
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