Bank of Canada likely to keep policy rates unchanged in September

Canadian central bank is set to meet tomorrow for its interest rate decision. According to a TD Economics research report, the Bank of Canada is likely to keep policy rates on hold tomorrow. Even if the bank will highlight a gradual normalization path with a heavy focus on data dependency, the Bank is expected to be encouraged by the economic data released in the past six weeks.

Markedly, the housing market has attained a modicum of stability, while Poloz has consistently stated that the Bank will just incorporate tariffs into their forecast when they are implemented. Consequently, the communique is expected to have a comparatively optimistic tone. Residual expectations for a September rate hike almost entirely disappeared after the slightly below consensus reading on the second quarter GDP, but markets are still strongly anchored around tightening in October.

“We expect the September communique to effectively (though not explicitly) affirm market expectations”, added TD Economics.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -78.828, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 110.505. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex