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May 31 - 06:55 PM

CAD: BoC To Hike 50bps On Wed But The Bar For A Hawkish Surprise Is High - Barclays

By eFXdata  —  May 31 - 03:00 PM

Barclays Research discusses its expectations for tomorrow's BoC policy meeting.

"We expect the BoC (Wed) to hike 50bp to 1.50%, in line with consensus and market pricing. We expect the statement to clearly indicate that rates need to keep rising with the economy in excess demand and inflation persisting well above target. A 75bp surprise hike is unlikely, in our view, as BoC speakers have not explicitly supported the idea of a larger hike and renewed global growth concerns reduce urgency for core central banks to adopt a more hawkish stance in the margin. Looking forward, however, we see risks that the BoC could keep the pace of hiking at 50bp in July as the bank’s rhetoric has been that it is prepared to act forcefully to take inflation back to target," Barclays notes. 

"While the bar for a hawkish surprise to boost the CAD is high (given current rate pricing), we retain our constructive medium-term view and continue to expect USDCAD to grind lower," Barclays adds. 

Source:
Barclays Research/Market Commentary

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