Monday, July 18, 2011

Bank of Canada Interest Rate Decision - 19 July 2011

The Bank of Canada (BOC) will announce their rate decision today at 9:00am sharp.
 
Here´s what analysts expect:

9:00am (NY Time) CA BOC Rate Decision Forecast 1.00% Previous 1.00%

ACTION: USD/CAD BUY 0.75% SELL 1.25%

The Trade Plan
 
Most analyst agree that the BOC will hold rates at 1.00%. I´ll be trading this release with a 0.25% deviation using Spike Trading method. In the event of a surprise hike it´s almost guaranteed that we´ll see strong market movement immediately after the release.

The Market
BOC is expected to keep rates unchanged during this meeting and as a matter of fact, most analysts agree that BOC will also keep rates at the current level for the September rate decision.

The key to this rate decision will be on BOC Carney’s accompanied statements. If Carney drops the “carefully consider” phrase and focuses on high inflation, then market sentiment could take that as a sign for possible rates hikes… Credit Suisse is pricing in about 50 basis points of hike in the next 12 months, and despite of market speculation, with CAD at record strength against USD, there is really no rush to hike rates, imho.

Additional Thoughts
 
It is extremely likely for BOC to keep rates unchanged. Market may react to the accompanied statement, but I believe this would probably be a no trade either way.

Pre-News Considerations

No Pre-News trading...


Thanks,