Investors following tactical strategies should consider buying USD/CAD this week, advises Barclays Capital in its weekly FX pick to clients. The trade is a tactical play into the BoC meeting on Wednesday.
“The BoC is widely expected to hold the rate unchanged at this meeting (Wednesday), so the focus is the tone in the accompanying statement and updated economic forecast in the monetary policy report. It is likely to drop reference to “downside risk to inflation” and make minor changes to near-term inflation forecast,” Barclays projects.
“However, it is likely to remain cautious on the development in prices as “temporary” effects from past CAD depreciation gradually dissipate and there has been no sign of marked pick-up in growth yet. The lack of a more hawkish signal from them would be CAD-negative in the near term, in our opinion,” Barclays adds.