CIBC reaction to the Bank of Canada decision
CIBC Research discusses its reaction to today's BoC policy decision.
"For central bankers, like doctors, the paramount objective is to "do no harm", and there's still enough uncertainty for the Bank of Canada to stand pat on interest rates. As we expected, the statement cited some of the recent positives that point to a pick up in activity in Q2, while cautioning a bit on excess inventories going into that quarter. On the external front, we had an "on the one hand, on the other hand" message, with the good news on US metals tariffs and progress towards the North American trade deal ratification offset by China's barriers to some Canadian exports and the heating up of global trade policy uncertainties," CIBC notes.
"Overall, the statement doesn't explicitly warn of rate hikes to come (that remains data dependent), but has an optimistic tone about what lies ahead, leaving the impression that the Bank sees the next move as a hike, if well down the road.
We're surprised at the initial market reaction (C$ weakened a bit and 2 year yields went lower), as our reading of this wasn't much different than what we would have expected," CIBC adds.
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