According to Kit Juckes, Research Analyst at Societe Generale, there will be more eyes than usual on today’s Bank of Canada meeting, where a 25bp hike to 0.75% is almost universally expected.
“Hawkish talk from the BOC at the start of June has triggered a 50bp rise in 1y1y rates, to 1.6%. That’s a huge re-pricing that shows what happens when expectations of endless easy money are reconsidered. The announcement is at 15:00 BST, with the July monetary policy report at the same time and BOC Governor Poloz’s press conference at 16:15. He’ll need to sound fairly hawkish to avoid some short-covering in USD/CAD which has fallen 8 figures during the climb in swap rates. The market doesn’t just price a hike today, but also prices a better than 50% chance of a further rate rise this year. That seems reasonable, but only if there is some encouragement for that view. To put it in context, 2 months ago the market priced a 2% chance of rates rising to 1% this year, according to Bloomberg.”