3 Jul 2015
BoC policy rates: July rate cut cannot be ruled out – RBS
FXStreet (Barcelona) - Brian Daingerfield, FX Trading Strategist at RBS, notes that the soft GDP data out of Canada has led the markets to price in a 40% chance of easing in the BoC’s July meeting.
Key Quotes
“Monthly GDP in April was softer-than-expected, as was first quarter GDP growth. Markets have quickly re-priced expectations for another Bank of Canada (BoC) rate cut this year, including pricing about a 40% chance of a rate cut at the July meeting. It is likely that the BoC will have to adjust its forecasts for near-term growth at the next forecast round released alongside its July interest rate decision.”
“We have long felt that the risks of a second rate cut in 2015 were under-priced, and after the BoC took a proactive stance in January with a 25bp pre-emptive “insurance” rate cut, a rate cut in July cannot be ruled out.”
“Still, more current indicators have improved, and the pickup in US consumer demand and employment growth is likely to be seen as a positive for non-energy export industries. Even so, we would expect the BoC to retain language about the important role of a weaker CAD in the adjustment of the economy.”
“Several crucial releases are due in Canada next week before the July decision – the senior loan officers survey, trade balance, and employment will likely all play a role in shaping BoC expectations.”
Key Quotes
“Monthly GDP in April was softer-than-expected, as was first quarter GDP growth. Markets have quickly re-priced expectations for another Bank of Canada (BoC) rate cut this year, including pricing about a 40% chance of a rate cut at the July meeting. It is likely that the BoC will have to adjust its forecasts for near-term growth at the next forecast round released alongside its July interest rate decision.”
“We have long felt that the risks of a second rate cut in 2015 were under-priced, and after the BoC took a proactive stance in January with a 25bp pre-emptive “insurance” rate cut, a rate cut in July cannot be ruled out.”
“Still, more current indicators have improved, and the pickup in US consumer demand and employment growth is likely to be seen as a positive for non-energy export industries. Even so, we would expect the BoC to retain language about the important role of a weaker CAD in the adjustment of the economy.”
“Several crucial releases are due in Canada next week before the July decision – the senior loan officers survey, trade balance, and employment will likely all play a role in shaping BoC expectations.”