The Bank of Canada meets on Wednesday, September 3 for an interest rate announcement. There will be a lot of speculation between now and then as to what the Bank of Canada will do, especially considering that the CAD has been beaten up rather drastically against the US Dollar recently. The speculation will probably go both ways, with the CAD bullish traders out there looking to the Friday report that revealed the Canadian economy accelerated during the Q2 timeframe at the fastest pace in almost 3 years. The annualized 3.1% gain was based upon exports, consumer spending, and in business investments. However, they did see a downward revision in the Q1 friends of the 0.9% this year. With that, the data is truly mixed.
On top of that, Canada’s highly sensitive to the United States and its economy. The US has gained an annualized number of 4.2% during the Q2 time frame. Because of this, the Canadian simply have not caught up yet. However, there are other things look at.
Gov. Poloz should be relatively impress, but not enough to actually take any type of move. After all, we have not seen a strong enough move in a positive direction to think that this is sustainable quite yet. After all, we are starting to see that the Canadian public is saving less. This could perhaps push back the estimated timetable of a recovery in Canada, which should see the Bank of Canada looking to tighten some time in reaction to the middle of 2016.
Also, keep in mind that the US economy is recovering in a very uneven fashion, so the Canadians will of course prefer to be careful before making too much on the GDP numbers out of America. Once the Americans show more of a sustainable recovery, and more importantly a more broad-based one, the Canadians will start to tighten. However, this meeting shouldn’t produce anything more than the continued “neutral” rhetoric that we have heard for some time. That being the case though, keep in mind that a lot of economies out there are thinking about more loosening, so the Canadian dollar might get a little bit of a bid against currencies besides the US dollar.
We expect very little out of Wednesday’s meeting.