We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy. In this installment, George discusses the upcoming Bank of Canada meeting on September 17 and whether the BoC will be forced to cut interest rates.
Recent Canadian economic data has leaned more on the side of weakness with the unemployment rate moving from 6.6% in January to 7.1% in August, while Q2 GDP showed a decline of 1.6%. This implies an 85% probability of a 25 bps rate cut priced into the market. However, RBC’s view since June of this year has been for monetary policy to remain unchanged for the rest of the year. With inflation running at or above 3% since April, the upper end of the Bank of Canada target, a weaker print at the next inflation print, could sway the BoC towards an interest rate cut. With the market pricing in a rate cut, there’s likely to be a greater impact on CAD if the BoC does not cut rates. Going forward, George’s expected trading range remains the same at 1.3500/1.3600 on the downside versus 1.3900/1.4000 on the topside.