On Wednesday, the Bank of Canada (BoC) will announce its decision on monetary policy. The base case scenario according to analysts at TD Securities is for the BoC to keep to broader narrative intact and guidance unchanged; and signal inflation is largely transitory. They see the BoC announcing a shift to QE reinvestment, starting in November.

Key Quotes: 

“We expect the BoC to argue that inflation is largely transitory, and to maintain its current forward guidance for the overnight rate. We also look for the BoC to announce that its QE program will transition to the reinvestment phase in November.”

“We like USDCAD higher into the BoC. While the stagflation theme has oddly benefited CAD, it's likely moved too far, too fast. CAD is trading at a 1-sigma premium on our dashboard and is the most overbought currency in the G10. We look for better selling levels ahead of the 1.2850 pivot point.”