BoC: Easing measures nearing withdrawal stage - Westpac

Firm Canadian data (recent CPI and ex-auto retail sales) continue to suggest a further withdrawal of BoC’s 2015 easing, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“The debate is whether this occurs in Oct (as markets favour), or as early as the Sep BoC policy meeting. If data continues to print on the firm side, bias could shift towards Sep given the BoC’s repeated commentary that their prior easing is no longer necessary.”

“However, the recent resumption of more belligerent comments from Trump around NAFTA negotiations may keep the potential of an early rate rise at bay. Given the extent of speculative long CAD positioning (back to 2012 levels), Trump-related risk reduction could both delay BoC and trigger CAD unwinds.”

“Despite Trump and positioning risks, any bout of CAD softness is unlikely to persist given BoC’s underlying shift in bias and the lift in Canadian activity.”