www.varchev.com

Wall Street expectations for BoC interest rate decision

Rating:

12345
Loading...

After a six month hiatus, the Bank of Canada looks set to hike interest rates again this week, but future policy moves will largely be determined by the prospect for a deal on US-Canada trade

What we're expecting

After experiencing a surprise burst of growth in 2017, economic activity has lost a little momentum in 2018. Part of this can be attributed to rising trade tensions that have seen businesses becoming more wary about putting money to work in the economy. Both capital investment and hiring have slowed and we've also seen consumer spending growth moderate. However, this has to be put in context. Last year the economy grew by more than 3% and even with the slowdown we're currently seeing, the economy is set to grow by more than 2% in 2018.
At the same time inflation is broadly in line with the Bank of Canada’s 2% target and this supports the notion that the economy is performing close to capacity. Wage growth has also accelerated so there is a sense that the BoC runs the risk of falling behind the curve. As a result, we see financial markets pricing in nearly a 90% chance of a 25bp hike on Wednesday while 16 out of 21 economists surveyed by Bloomberg look for such a move. We agree and also anticipate a 25bp move.

Trade tensions are a concern

Further policy moves are likely to be contingent on whether the current storm surrounding President Trump’s trade rhetoric calms down. The imposition of tariffs has seemingly had only a modest direct impact on the economy so far, with it being more of a drag on sentiment. However, remember that the $545bn of cross-border trade Canada conducts with the US means any escalation of protectionist policies could have very important ramifications. Indeed, Canadian exports to the US are equivalent to 17% of Canadian GDP.
President Trump has suggested pushing NAFTA negotiations further down the line until after the US mid-term elections in November, which will prolong Canada’s trade uncertainties. However, the US economy is roaring ahead and while the trade situation remains largely unchanged, this poses major opportunities for Canadian exporters. As such we are still anticipating another rate rise before the end of the year from the Bank of Canada. That said, should more tariffs suddenly be applied the probability of such a move will wane.

Source: Think.ing


 Jr_Trader Nihat Dail

Read more:

RECCOMEND WAS THIS POST USEFUL FOR YOU?
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
WARNING: Any news, opinions, research, data or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. Varchev Finance Ltd. expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information. Varchev Finance Ltd. may provide information, quotes, references and links to or from other sites and blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the sites, blogs or other sources of information.
Varchev Finance

London


25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256

Universal numbers

World Financial Markets - 0700 17 600    Varchev Exchange - 0700 115 44

Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.

Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006

The information on this site is not directed at residents of the United States or Belgium and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Disclaimer:

Derivatives and margin trading involve a high degree risk level. You should not trade Forex and CFD unless you fully understand how it functions, what your benefits can be, what your risk is, and what you may lose. Please, note that the losses can be practically unlimited and that the initial deposit will not permanently limit the risk. You have to fully realize your financial status and make sure that trading in derivatives hides the risk of losing the entire amount invested. Invest only the amounts that you are able to lose.

chat with dealer
chat with dealer
Cookies policy