BoC Hikes Rates
The CAD has strengthened in the aftermath of the BoC rate (25bp) hike which was priced into the tune of 85%, according to the OIS market. The central bank has duly responded and this lifts the cash rate to 1.50%. The focus though was on the accompanying statement and here the bank is leaving the door open for another move later in the year, though naturally qualifies this with making this data dependent.
1.3100 has now given way in response to the lack of dovish expectations, with comments on trade concerns and ongoing slack in the labour market. Against this, however, the statement reiterates the economy running near to capacity with investment and exports still driving growth. GDP is expected to come out at 2.2% this year, rising to 2.2% next year, though growth is seen slipping to 1.9% in 2020.
Key levels to watch for in USD/CAD now lie in the mid 1.3000's. Buyers here could be a little vulnerable though as we have noted some steady buying in anticipation of a dovish hike, and as yet, this looks a little wide of the mark. Later in the day, we have the press conference just after 16.00 London time, where we could see further volatility in the CAD which has so far been pretty measured.