Economists at Credit Suisse analyze USD/CAD ahead of the Bank of Canada (BoC) Interest Rate Decision.
Hawkish hold or cautious hike?
We see a ‘hawkish hold’ as the most likely outcome from the BoC today, but don’t rule out a 25 bps hike with cautious guidance.
The message of policy continuity that our view implies should be consistent with FX stability, in line with our 1.3450 end-Q2 target.
We expect knee-jerk moves higher in USD/CAD related to an unchanged outcome to be short-lived and would look to fade rallies to the 200-DMA (~1.3510).
In the event of a hike, a quick drop to the Apr lows around 1.3300-1.3315 is a possibility: loonie strength beyond that point should nevertheless remain elusive.
See – BoC Preview: Forecasts from six major banks, rates unchanged but hawkish bias
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