ANZ on Canada - CAD/JPY, sell the fact

ANZ on the Bank of Canada meeting today and currency implications

Main points:

• We close out our short AUD/CAD trade initiated on 24 March with our target hit at 0.99 for a profit of 2.7% with carry
• The explicit acknowledgment of better economic outcomes in Canada came through in mid-June; however the risk is that the market has priced in too many hikes over the next 12 months (65bps), given our cautious view on the inflation outlook
• We expect a 'dovish hike' and thus now recommend selling the CAD/JPY at 88.14 ahead of the BoC meeting today. We are targeting 85.60 and will reassess the trade at 89.20