Bank of America Global Research discusses its expectations for tomorrow's BoC September policy decision.
"We expect the BoC to remain on hold at this meeting with the policy rate at 0.25% and with bond purchases at C$2bn per week. Despite high inflation, the economy is still too weak to withdraw stimulus, and the US Fed is providing room to wait. A Federal Election on 20 September may be one more consideration to wait," BofA notes.
"A potentially dovish tone to the statement suggests idiosyncratic downside risks to the Canadian dollar as relative monetary policy drivers remain alive and well. Still, CAD will continue to be influenced by terms of trade developments (i.e. commodity prices) and global risk appetite, both of which have rebounded of late on expectations that Fed accommodation will persist as US data have softened. We see limits to this. Per our recent forecast revision, we expect USDCAD at 1.30 at end-year," BofA adds.