Credit Agricole CIB Research discusses its expectations for tomorrow's BoC meeting and maintains a constructive bias on CAD.
"CAD continues to exhibit the strongest correlation with the USD among the G10 commodity currencies. We further believe that the heightened correlation could make the currency the relative commodity-block outperformer if the recent spike of UST yields undermines risk sentiment in earnest," CACIB notes.
"Looking ahead, this week’s BoC policy meeting will attract considerable attention. Key for FX markets would be the MPC’s reaction to the latest tightening of Canadian financial conditions. To the extent that the BoC’s push-back remains more moderate, this could keep CAD rates and yields close to recent highs and thus prop up the currency," CACIB adds.