Canada goes to the polls today and the latest opinion surveys are showing the Liberal Party’s lead over the Conservatives continuing to widen, notes BNP Paribas.
“Liberals have pledged up to $5bn a year in additional infrastructure spending. While an easier fiscal policy stance would over time imply less need for monetary easing, the longer-term nature of the spending plans suggests the impact probably would not be immediate,” BNPP adds.
Meanwhile, BNPP economists see a strong case for further policy easing but they expect the BoC to refrain from cutting rates on Wednesday.
“Recent communications from the BoC have been surprisingly optimistic and the money market curve is very flat; we think the risk is the message could turn more dovish, forcing the market to start pricing in a least some probability of a cut in the coming months,” BNPP projects.
Furthermore, BNPP FX positioning analysis signals CAD short positioning has significantly moderated from -40 at the end of August to -16 currently.
“We thus see upside risks to USDCAD around the announcement,” BNPP argues.
‘This content has been provided under specific arrangement with eFXnews.’