What’s next for the Canadian dollar after the BOC? Two opinions

The Bank of Canada decided to leave interest rates unchanged and remained “firmly neutral”, making it in practice a dovish stance. Will the loonie continue falling? What’s next?

Here is their view, courtesy of eFXnews:

USD/CAD: Confined To A Tight Range But Data Favors Fading Topside Into 1.29 – TD

TD FX Strategy Research discusses USD/CAD outlook, and notes that the pair has marched higher following yesterday’s BoC statement which was more dovish than expected, injecting a new level of cautiousness despite the improvement in the data.

“We believe this BoC outlook provides a snapshot of the current state of affairs rather than a forward-looking assessment. Even so, the injection of renewed BoC cautiousness (Poloz likely to emphasize it again next week) leaves a murky (doubtful) path for January.

For now, USDCAD looks confined to a tight trading range with the data still arguing to fade topside ahead of 1.29, but downside momentum capped around 1.26 in the short-run,” TD argues.

In line with this view, TD maintains a short USD/CAD position* from 1.2770 targeting 1.2380, with a stop at 1.2960. 

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CAD: Dec BoC: Hawks Disappointed In Lack Of A Jan Hike Signal But It’s Not BoC Style – CIBC

CIBC Research discusses its reaction to today’s BoC December statement and notes that it didn’t offer a clearer call on just how long they will be waiting and seeing before raising rates again.

“Further rate hikes are still coming, but even if they move ahead of our April target, that needn’t mean that we’ll see more than 50 basis points in total next year, given the Bank’s emphasis on being cautious on that front…

Hawks may be slightly disappointed by the lack of a clear signal of a January hike, but that really isn’t their style, and instead, we like others will have to watch upcoming data on October GDP and December employment to fine tune forecasts for when the next hike comes,” CIBC argues.

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