Mark Carney’s Bank of Canada is like a glacier so don’t expect any volcanic action in the announcement at the top of the hour.
The landscape has certainly changed since the April 17 decision and the statement will acknowledge that. Look for comments about the higher risks from Europe and lower commodity prices. Headwinds in the US also merit a mention.
The current BOC forecast is 2.4% growth in 2012 and 2013 but that could be downgraded after 1.9% growth in Q1 fell short of the 2.5% expected by the BOC.
I expect the phrase “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate” will simply be removed and the BOC will take a neutral stance, pushing USD/CAD to 1.0350. However, a statement that hints at cuts would spark a rally in USD/CAD, likely beyond 1.05.
