The Canadian dollar faces short-term downside risk as Rabobank analysts anticipate a BoC rate hold, contradicting market expectations of an 85% chance for a hike.
The Canadian dollar faces potential downward pressure as Rabobank strategists anticipate the Bank of Canada will maintain its overnight policy rate at 2.25% during the October 28 meeting. This outlook directly contradicts current market sentiment, where OIS markets have priced in an 85% probability of a rate hike, suggesting a significant risk of a 'dovish surprise' if the central bank chooses to hold.
OIS markets are currently pricing in an 85% chance of a rate hike.
Rabobank expects the Bank of Canada to hold the overnight policy rate at 2.25%.
Rabobank strategists Christian Lawrence and Molly Schwartz forecast the Bank of Canada will maintain its overnight policy rate at 2.25% during the October 28 meeting. This outlook diverges significantly from OIS market pricing, which currently reflects an 85% probability of a rate hike, potentially pressuring the Canadian dollar.
OIS markets are currently pricing in an 85% probability of a rate hike at the October 28 meeting.
If the Bank of Canada chooses to hold rates at 2.25% as Rabobank predicts, the divergence from market expectations of a hike could weigh on the currency.