Bank of Canada likely to keep interest rate on hold

Canadian central bank, the Bank of Canada, is set to meet tomorrow for its interest rate decision. According to a TD Economics research report, the Bank of Canada is expected to keep the overnight rate on hold at 1.75 percent.

The communique is likely to be fairly short, and while the central bank might note that softer commodity prices present a headwind to the outlook, they are expected to again warn that higher rates would be required.

The biggest question mark would be around the central bank’s treatment of the energy shock. Decreased oil prices would materially suppress the economic growth in the fourth quarter, and even if the effect is likely to be transitory markets would be looking for reassurance that a January rate hike is still a realistic possibility.

“If the Governor sounds overly concerned about falling oil prices, there is a risk that rates markets could rally sharply”, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 30.8669, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 1.99853. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex