The RBA hiked rates by 50-bps this week, but additional 50-bps appear less likely moving forward. The September BoC rate decision could produce a 100-bps rate hike; beyond there, questions linger about their commitment to additional rate hikes.
After raising their main rate by 100-bps in July – the largest such increase since August 1998 – questions lingered about whether or not the BOC would continue with an aggressive rate hike path. Those questions may have been answered last month, when the July Canada inflation report showed signs of decelerating price pressures.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias.met expectations by raising rathe fourth consecutive 50-bps rate hike.
But having dropped language suggesting that interest rate policy was normalizing, it stands to reason that the RBA has taken a less hawkish tone than anticipated. If the RBA raises rates over the coming months, it appears increasingly likely that the cadence will be at 25-bps moving forward.
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