(06 SEPTEMBER 2017)DAILY MARKET BRIEF 2:BoC to hike

(06 SEPTEMBER 2017)DAILY MARKET BRIEF 2:BoC to hike

6 September 2017, 13:28
Jiming Huang
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Watch CAD on BoC meeting today

At today’s Bank of Canada monetary policy meeting we now expected a 25bp hike. The Canadian economy has accelerated for multiple quarters and expectations for rapid rise in inflation will persuade the bank to act now. However, there is a high probability the bank opts to hold to due to high level of household indebtedness and interest to monitor developments at the Fed. Either way we suspect that long CAD short USD would be a solid way to play the current environment. As strong worded comment that indicates further tightening (October if not today) will likely catch the markets behind the curve with only 65bp of hikes priced in until the end of 2018. USDCAD downtrend still in play with break of 1.2414 signaling a bearish extension targeting 1.2128.


Singapore a proxy for solid global growth

Singapore provides a solid barometer for the health of the global economy. In the Monetary Authority of Singapore (MAS) quarterly near-term outlook, called “Recent Economic Developments in Singapore” there is a clear expression of optimism in the outlook for the global and domestic economy. In particularly the bank highlighted sustained momentum in electronic industry. The MAS stated, “firm external demand conditions, coupled with the upturn in the global IT cycle, will continue to impart positive spillovers.” The MAS report revised higher G3 growth projections for both 2017 and 2018 to 1.9% from 1.8% in June. Despite negative geopolitical headlines clouding the markets outlook (North Korea a primary disturbance to investors risk appetite), according to the MAS conditions remain positive. Slow and steady global growth continues to support demand for EM currencies in the near term. 

By Peter Rosenstreich

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