CAD: Focus on BoC’s governor Poloz speech today – RBC CM

Elsa Lignos, Senior Currency Strategist at RBC Capital Markets, suggests that the BoC’s governor Poloz speaks today at 12.35ET/17.35BST to three economist/finance groups in Quebec City, with audience Q&A followed by a press conference at 14.15ET.

Key Quotes

“The topic of the speech is ‘Living with lower for longer.’ It is a challenge faced by all central banks—what to do about the side-effects of ultra-low policy rates. Last week’s Q2 National Balance Sheet data showed a new record of 167.6% on the debt-to-income ratio. Senior Dep Governor Wilkins tackled it in her speech last week (arguing that “the scope for monetary policy to offset negative demand shocks will be more limited” and “we shouldn’t count on monetary policy to solve everything”) and her conclusion (that “fiscal policy can be a powerful tool to boost growth”) is one that more and more people are reaching.

Poloz is unlikely to reach a very different conclusion, and given that the forward curve has very little priced in (-5bps by April next year), there is very little to take out. So, the risks to CAD seem asymmetric. There is more risk of a CAD-negative headline (more pessimistic tone from Poloz on export/growth outlook) than a CAD-positive one, if we get a market-moving headline at all.”