The Governor of the Bank of Canada, Stephen Poloz, caused a minor market stir yesterday when his remarks at a testimony before the Canadian House of Common’s Standing Committee were misinterpreted, at least per the Bank. The benchmark USD/CAD spiked down by more than 100 pips before mostly recovering very rapidly upon the clarification.
The words in question were "Our best plan right now, we think, is to wait for the next 18 months or so." This was interpreted by the market as a reference to monetary policy, and was taken to mean that the Bank’s intention would be to keep rates on hold for another year and a half, provided circumstances would not put them in a position where they would be forced into a move.
The Governor stated later that his comment referred to concern over the output gap.
The Loonie is in the spotlight now as it closed last week at the highest price since February, after coiling up bullishly over the past several months.
Chinese Growth Forecast
The People’s Bank of China, acting through the mouthpiece of its chief economist, is now forecasting a growth rate of 6.7% this year. This is broadly in line with what the market has been expecting from the PBOC and the Yuan remained stable against a basket of currencies despite the greenback’s current strength. There is in any case great skepticism over the accuracy of ostensibly hard data released by the Chinese state.
U.S. Dollar Strength
The greenback remains bid, and markets are now pricing in a 67% chance of a rate hike by the FOMC in December. The currency is making key technical advances against several others, such as the Euro, Swiss Franc and British Pound.