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USD/CAD: watch Poloz on 7th Jan - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 5, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Guatemala) - Analysts at Nomura, in respect of the BoC, explained that in their view, the recent weakness has greatly increased the likelihood of a rate cut.

    Key Quotes:

    "However, we believe that the economy is much less responsive to further rate cuts than it was a couple of years ago or even at the beginning of 2015, and a cut may prove to be counterproductive. Nevertheless, even though we doubt the effectiveness of further rate cuts, the BoC cannot afford to say that it is out of ammunition and unable to react to the weakness.

    The recent communication from the BoC suggest that it anticipated some weakness in late 2015, with Governor Poloz saying that the “BoC expects a weak hand-off in Q4”. Moreover, Governor Poloz also said that the Canadian economy was “far from needing extraordinary stimulus” or unconventional measures, but also that “should the need arise, we’ll be ready”. Nevertheless, these comments were made in early December, before the release of the weak data report.

    With this in mind, Governor Poloz’s speech on 7 January will be very important as he could hint at the need for further action. We continue to believe that the BoC will keep its policy rate unchanged in 2016.

    However, the recent weakness has significantly increased the likelihood of another rate cut. We currently put the probability of a rate cut in the first half of 2016 at around 40%."
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