The Bank of Canada decision is tomorrow and expectations for fireworks are nil but economists at Citi say last week’s disappointing Q1 GDP reading will keep the BOC focused on the downside inflation risks.
Poloz has maintained a neutral stance and there won’t be any change as officials await signs of a pickup in exports and investment that never seems to appear.
USD/CAD fell recently on stronger headline inflation but Citi says the strength was driven by temporary factors and the BOC is likely to emphasize that underlying inflation will remain weak. They have a medium-term target of 1.10 to 1.11.
Jeez, a ‘medium-term’ target that’s 78 pips from spot price — hardly a bet on volatility.
