Few economists expect a Bank of Canada cut on Wednesday
Regardless of how the risk environment and commodity prices evolve this week commodity bloc currencies remain vulnerable to the damage already done to their domestic economy by the Q3 slump in commodity prices, notes BNP Paribas.
BNPP expects the BoC to cut rates by 25bp on Wednesday.
"Slightly firmer GDP and employment data has left the market reluctant to price in immediate BoC easing but our economists are sticking with their non-consensus view amid a recessionary economy and continued weakness in oil prices," BNPP argues.
"Easing as early as this week would generate renewed USDCAD upside momentum towards the 1.35 target on our long USDCAD trade," BNPP projects.
BNPP maintains a long USD/CAD trade in its portfolio in spot from 1.3140, with a stop at 1.2940, and a target at 1.35 (spot at 1.3200).
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