Goldman Sachs anticipates a rate hike from the Bank of Canada (BoC) at this week’s meeting following strong indicators from the country’s CPI report, June’s significant job growth, and a concerned tone in the Business Outlook Survey.
Key Points:
1. BoC’s Data-Dependent Approach: The focus for the BoC meeting and Governor Macklem’s press conference will be any potential forward guidance and conditions for additional rate hikes. Goldman Sachs foresees the BoC sticking to its data-dependent approach and taking decisions meeting by meeting. However, there is a risk that the BoC could signal a willingness to pause after a second hike.
2. Upside Risk on Policy Tightening: Despite the potential signal for a pause, the risks are still skewed towards further policy tightening. The market is currently pricing a 60% chance of a hike in September.
3. Short-Term USD/CAD Upside: Goldman Sachs recently updated their USD/CAD forecasts and continues to predict some upside in the USD/CAD over the next three months due to near-term USD strength.
4. Cyclical FX to Outperform in Longer-Term: Beyond the three-month mark, Goldman Sachs anticipates cyclical currencies like CAD, AUD, and NZD to outperform over the next 12 months, assuming their benign global growth forecasts hold true.
This
is via the folks at eFX.
For
bank trade ideas, check
out eFX Plus.
For a limited time, get a 7 day free trial, basic for $79 per month
and premium at $109 per month. Get
it here.
—
Earlier preview:
The +25bp move is widely expected. This preview via CIBC, as a further example:
- While job vacancy rates have continued to fall, the latest labour force report suggests that May’s drop in employment was nothing more than a statistical anomaly related to volatility in youth employment. The rebound in jobs during June, and an unemployment rate that is still low relative to pre-pandemic norms, may have just tipped the scales towards an immediate hike. Because of that we now forecast a 25 bps hike in July, rather than at the September meeting, although we still suspect that 5.0% will be the peak for the Bank of Canada’s overnight rate.
Due at 1400 GMT, which is 10am Eastern time in Canda and the US.