BoC: The impact on CAD may be positive but rather limited – Barclays

In the day ahead, the main highlight will be the Bank of Canada’s latest policy decision. Economists at Barclays Research expect the CAD impact to be slightly positive.

CAD remains first and foremost a risk/SPX trade

“We expect some CAD upside from a 25 bps hike by the BoC that is not completely priced in. However, CAD gains from underpriced BoC hikes in the past have been modest and short-lived and sustained gains depend on the risk backdrop.”

“Beyond the tactical considerations around this week’s meeting, CAD remains first and foremost a risk/SPX trade. Accordingly, sustained gains versus the US Dollar in particular likely require S&P 500 index catch-up with equity markets abroad.”

See – BoC Preview: Forecasts from eight major banks, edging towards a final rate hike