Forex Flash: CAD may be expecting too much BoC risk – TD Securities

The constructive mood about the markets today is not spilling over into the CAD as the currency gets ahead of the BoC decision and statement "and the fact that USD/CAD is holding close to 1.03 suggests that market participants are pricing in a high risk of a further moderation in the BoC’s language", according to TD Securities analysts, that are only expecting only a nod to weaker growth trends from the BoC.

"We do not expect a move to neutral policy bias (i.e. removing the tightening bias altogether), even if that is a risk and what some may be expecting, just yet", wrote analysts Shaun Osborne and Greg Moore. "We think the market may be expecting a little too much BoC risk today and may be disappointed by the likely outcome of just a modest tweak in the policy message", they added, seeing scope for a modest retracement in the USD/CAD in the short-run, even if the broader trend remains higher.

Technically, the USD/CAD is stronger today, with good support in the upper 1.02s. "Weakness below 1.0270 may see funds drop back to the 1.02 area", they concluded.