Don’t miss this month’s edition of the George Davis Report, where George discusses the implications of a more hawkish Bank of Canada.
What you need to know
The BoC delivered a more hawkish message at their January meeting, effectively preparing the market and Canadian public for higher interest rates ahead.
While Governor Macklem framed it as a “significant” policy shift, he emphasized that the Bank would take deliberate steps in the hiking process and communicate clearly.
Every meeting will now be “live”, but deliberate steps suggest that 50bp hikes will not be seen in the early portion of the tightening cycle.
While RBC Economics is looking for a terminal rate of around 1.75% in 2023, we believe that current market pricing is too aggressive.
A repricing of Canadian and US rate expectations may present near-term downside risks for USD/CAD, but longer-term upside risks.
For the trading range:
USD/CAD
Buyers
1.2400/1.2500
Sellers
1.2800/1.2900