BoC Can’t Anchor CAD
The overnight RBA decision has underscored the role of the AUD in the central bank’s interest rate prospects, to the extent that exchange rates probably serve as a better barometer for policy expectations rather than the ‘rate pricing’ highlighted by the ECB and BoE. Like the RBA, the BoC will stress its wishes to see the domestic economy rebalance away from investment growth. Unlike the RBA, the BoC follows macro guidance and the currency is secondary. Yet, the CAD may prove a better guidance of the macro factors affecting the BoC, and overall positioning should not be swayed by supposed changes in policy expectations.
Read the full report: UBS