The Bank of Canada meets tomorrow with no expectations of a move on the 1.25% rate.
The focus will be on forward guidance. In the June 5 decision, the BOC said “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate,” which is a rate hiking bias.
The OIS market is pricing a 12% chance of a rate hike but a move to a dovish bias is much more likely. The market is lightly priced for future rate cuts but there is plenty of room on the downside and today’s US retail sales number and soft IMF forecasts is, to me, a sure indication that cuts are coming.
Look for CAD weakness in the day ahead (USD/CAD strength). In particular, CAD/JPY is the biggest mover today and looks soft and is in the process of forming an outside day that points to a retest of 77.31 followed by 76.62.
