USD/CAD trading well below fair value estimates - Scotiabank

Analysts at Scotiabank explained that the BoC's  neutral hike was delivered as policymakers struck a balanced tone.

Key Quotes:

"...acknowledging the ongoing improvement in data while highlighting concerns surrounding NAFTA and uncertainties relating to potential growth and wages."

"Rate expectations remain unchanged with OIS pricing in roughly 60bpts of tightening for the remainder of the year."

"The 2Y spread remains elevated however, and USD/CAD is trading well below levels implied by our fair value estimates (~1.2750-1.2900)."

"Near-term risk is limited ahead of Friday’s manufacturing data, with retail sales and CPI set to compete with next week’s NAFTA negotiations."