Morning Commentary & Currency Insights – January 17, 2018

With no other significant data releases, speeches or meetings on tap today it’s all about the Bank of Canada announcement at 10AM EST.  Expectations are for a rate hike of 0.25% and the tone of their Monetary Policy Report, which will be released simultaneously, is going to be just as important as the rate decision.  If the Bank does not hike the currency will weaken to the tune of 1%, give or take, immediately but several factors will be at play to see if it remains under pressure.  It is clear that without the specter of NAFTA looming over the country’s economic future a rate hike would be a layup.  If the Bank does not hike it just delays the inevitable.  If they are bullish on the economy in the MPR people will use CAD weakness as a buying opportunity.  Remember that the BoC will not be happy with a rate at or near 1.2000 so a hike with a positive MPR will likely be tempered with some sort of verbiage at a later date in an attempt to keep the market from breaching this level.