BoC: Markets attach a higher probability to a 25 Oct hike - Westpac

The BoC’s next meeting is Sep 6 but markets attach a higher probability to a 25 Oct hike (64%), when another Monetary Policy Review is scheduled, according to Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“A relatively low 28% probability is attached to their Sep 6 meeting but those odds seem too low if the BoC’s expectation that the output will be closed by year’s end play out. The Bank’s signaling that it intends to remove the insurance easings of 2015 have been crystal clear. There is no need to wait for another MPR.” 

“USD/CAD should trade to 1.25 if markets move to price in another hike at their 6 Sep meeting as we expect and would not be surprised to see 1.21 trade on a 3-6mth horizon (50% retracement of the 2011-2016 0.94-1.47 rally), if the Fed loses its nerve and does not deliver another hike in 2017.”