Today, the spotlight will fall on the BoC rate decision. Given that a hike is considered almost a done deal, focus will turn to the statement for hints with regards to the Bank’s future plans. The euro slid during the European morning Tuesday on reports regarding German politics and next week’s ECB meeting.
Loonie Traders Fix Their Gaze on the BoC Decision
Today, the highlight is likely to be the BoC rate decision. At its previous gathering, the Bank decided to refrain from acting, while in the statement, it maintained the part saying that officials will continue to be cautious in making future adjustments to the policy rate. However, in an interview a few days after that meeting, Governor Poloz clarified that caution does not mean sitting back and doing nothing, while data has been flashing the green light for policymakers to go ahead and push the hike button. Both the headline and core inflation rates rose notably in November, the December jobs report revealed another month of stellar employment gains, while retail sales accelerated strongly in October. The icing on the cake was the BoC Business Outlook Survey for Q4, which showed an overall robust picture for Canada’s sales and business investment.
Having said all these, there are still reasons for the Bank to hold off from acting so soon, ranging from the still-below-target core inflation rate to NAFTA uncertainties. Also, a strong Canadian dollar could start weighing on the nation’s exports and inflation, something that policymakers may not be comfortable with. However, we have to repeat that the scenario where the Bank remains sidelined is the least likely.
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