CAD: Neutral bias amid conflicting BoC, NAFTA and US tax sentiment - ING

With sentiment over a Jan 2018 BoC rate hike still mixed (markets are pricing in 40% odds), today’s Oct CPI report will be crucial, according to Viraj Patel, Foreign Exchange Strategist at ING.

Key Quotes

“Governor Poloz's latest speech defended the BoC's sanguine inflation projections – which still primarily attributes the deviation from target to ‘other’ factors. With the lagged effects of the summer CAD rally also to factor in, the inflation outlook is set to get worse – before it gets better. The macro fallout from tighter local financial conditions may keep the BoC on hold in 1Q18, meaning that some trivial CAD downside is likely. However, the bar for USD/CAD to move above 1.30 is high. We retain our 4Q17 target of 1.27.”