Poloz hinted that he’s happy with rates
In the past week, the market got excited about the potential for rate cuts. I would argue that was from a mis-read of the headlines. Earlier in the week, Wilkins said there was room to cut if needed but also that the economy was in a ‘relatively good place overall’. Rate hike odds for Dec 4 rose as high as 25%.
As I said at the time:
The market is focusing on the line that there is ‘room to maneuver’. I
don’t think she’s sending a signal here but any time there is talk of
cuts (and QE), that’s the kneejerk.
That prompted a re-think and cut odds have now fallen to 12.6%.
In turn, USD/CAD has fallen as well hitting a low of 1.3270 today. That’s still close to the top end of the three-month range. However if oil continues to rally the we could see a fall back to 1.3200 in short order. For the short-term move, watch the little intraday wedge that has formed today. The rule of thumb is that a break tends to follow the prior direction (so lower in this case).