CAD: Setting up for Bank of Canada - TDS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 13, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Analysts at TD shares the universal consensus expectation for the Bank of Canada to hold its overnight rate unchanged at 0.50%.

    Key Quotes

    “The focus will therefore fall to the tone of the communique and the accompanying MPR (Governor Poloz will also give a press conference later in the morning). Despite a positive turn in the domestic data, TD expects that the Bank will err on the side of caution in noting a more challenging outlook over a longer horizon. This echoes recent rhetoric from the Federal Reserve and the IMF and will be reflected in prospective forecast revisions raising 2016Q1 substantially (and filter into a higher annual average for 2016) but cutting growth in 2017 above and beyond the lift from the fiscal stimulus announced in the Federal Budget. The net impact, including a positive adjustment to potential output reflecting government infrastructure investment, could result in pushing the closure of the output gap into 2018.

    A key uncertainty is how the Bank will address the currency which is exerting around a 0.5% drag on growth relative to January. The Bank is expected to acknowledge a stronger currency as a statement of fact but will stop short of expressing explicit concern. Collectively the Bank's message will be interpreted with a marginally dovish bias though those looking for an even more aggressive message designed to weaken the currency will be disappointed.”
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