BoC: no change expected - Nomura

Analysts at Nomura explained that they expect no change in policy from the Bank of Canada (BoC) this week. 

Key Quotes:

"The underlying message that rates should rise over the medium term looks set to remain. However, the BoC should not pre-commit. We see a risk the BoC revises up its estimates for potential growth. Such a step could strengthen the BoC’s case for treading carefully in the near term, and could see market expectations for another rate hike in 2017 pared back further.

The skew in market positioning and CAD’s high correlation to interest rate spreads leaves it sensitive to a rates re-pricing. Should the BoC shift out when it expects the Canadian economy to reach full capacity, we think this would further undermine the CAD. To capture the BoC and upcoming USD-centric events, we enter a two-week 1.2750/1.2900 USD/CAD call spread, offering a 5x maximum payout."