Economists at Credit Suisse remain neutral on CAD ahead of today’s BoC rate decision, with a 1.3400 USD/CAD target and a 1.3140-1.3800 range for Q1.

A high bar for BoC surprises

“We’ve adopted a neutral bias for Q1 with a 1.34 USD/CAD target in a 1.3140-1.3800 range, and so far do not see a strong reason to change views. Strong pushback from the BoC today, pointing to further rate hikes ahead, might represent a challenge to our view. This said we suspect markets would adopt a data-dependent wait-and-see approach in this case, rather than rush back to price in further rate hikes.”

“A surprise featuring an unchanged outcome, while likely to drive a negative knee-jerk CAD reaction, would also likely be seen as consistent with the generally weak consensus view on Canada’s growth outlook, and as such not shocking or at odds with the priced-in monetary policy outlook.” 

“External developments, such as next week’s FOMC, will continue to play a more prominent role in driving USD/CAD price action in coming weeks.” 

See – BoC Preview: Forecasts from eight major banks, edging towards a final rate hike