The BOC decision is tomorrow
Bank of America Merrill Lynch Research discusses its expectations for tomorrow's BoC May policy meeting.
"We expect the Bank of Canada (BoC) to remain on hold on 29 May, keeping the overnight rate target at 1.75%. We expect only marginal changes to the statement, mostly to highlight the strength of the labor market some upside risks to the BoC's activity forecasts, but also a persistently elevated state of trade policy uncertainty. We expect the BoC to remain on hold this year, but to resume hikes early next year," BofAML projects.
"An on-hold decision by the BoC on Wednesday should not move FX much as this outcome is widely expected. Of more importance to USD/CAD on the day will be the tone of communication, which we would expect to remain largely positive on the Canadian economy while acknowledging substantial risks, in particular a persistentlyelevated state of trade policy uncertainty. We remain bullish USD/CAD and expect the uptrend to steepen through mid-year, though this meeting may not provide much of a catalyst," BofAML adds.
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