What to expect from BOC Governor Poloz — 3 views

Bank of Canada Governor Poloz will speak at 1545 GMT

Barclays:

Barclays Capital Research notes that today BoC Governor Poloz will deliver a speech followed by a press conference, expecting that to be a market mover for CAD.

«He will likely reiterate that the BoC remains data dependent and it is not in a predetermined path of hiking rates.

The market reaction will depend on how much emphasis he puts on recent CAD strength and in monitoring the effect of higher interest rates in the economy, which will set the tone for the October 25 meeting.

Mr. Poloz’s speech follows last week’s remarks by Deputy Governor Lane, in which he mentioned that the current policy stance seems «appropriate», while emphasizing that the BoC will «strongly» take into account recent CAD strength in its decision making. 

We think Governor Poloz is likely to reiterate this line of thought, as the Governing Council tends to deliver unified and consistent messages, although Governor Poloz will want to retain the option of one additional hike before year-end.

The market is pricing 37% of an October hike (currently priced: 9bp, and 24bp for December), and we would expect modest CAD weakness as markets re-assess the likelihood of an October hike,» Barclays argues.

Credit Agricole

Credit Agricole CIB Research notes that there will be a lot of focus on today’s speech by BoC Governor Poloz.

«We expect the overall message to be consistent with the gradual, data-dependent tightening cycle, as well as including more details on how the strength in the CAD is impacting the Governing Council’s thinking.

With markets pricing in 42% chance of a hike in October, any hints that the BoC is likely to wait a little longer (we expect a December move) could weigh on the CAD,» CACIB argues

CIBC

CIBC Research expects that at today’s speech, BoC Governor Poloz would try to get markets back into the slow ‘Lane’ (following last week’s speech by Deputy Governor Lane) in terms of rate hike expectations and their impact on the CAD. 

«By downplaying those expectations for further BoC hikes this year, at the same time that the Fed has left a December hike firmly on the table, two-year yield spreads will move back in favour of the US and pull the loonie down from recent lofty levels,» CIBC argues. 

«We see the C$ falling to 77 cents (USDCAD 1.30) in six months’ time,» CIBC adds.

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