Canadian inflation dropped lower in July. But not enough to derail the Bank of Canada (BoC) from its currently aggressive hiking path. USD/CAD edges lower, however, economists at TD Securities expect dips in the pair to be bought into 1.28.

Positioning for topside around the BoC meeting

“Unless the data takes a huge nosedive between now and the September meeting, a 75 bps hike seems like a prudent bet. We are generally viewing the CAD as living on borrowed time however.”

“While this number may help to introduce modest downside into USD/CAD, we expect dips to be bought into 1.28. This is because the BoC meeting next month could be construed as peak hawkishness.” 

“We like the idea of legging into CAD shorts around the BoC meeting as the Bank may start to change its tune just as the impact of higher rates begins to show in the data.”