USD/CAD to edge higher as scope for BoC dovish disappointment is evident – HSBC

Economists at HSBC expect USD/CAD to push higher given a lot of hawkishness is already in the price.

Rates rather than riks is likely to remain dominant for the loonie

“The market has priced in marginally in favour of a 50bp hike (rather than a 25bp hike) at the Bank of Canada (BoC)’s 13 April meeting, in addition to a sequence of rate hikes that will see the policy rate rise by 175bp by the end of the year. As Canada is a highly indebted economy, the scope for dovish disappointment is evident in either April or later this year, creating an asymmetric downside for the CAD.” 

“We assume that geopolitical risk remains at its current level which means USD/CAD will likely be driven by rates rather than risk appetite.”