BoC to retain its current cautiousness with rates remaining on hold - BBH

Analysts at BBH points out that the Bank of Canada is the only major central bank meeting in the week ahead and is expected to retain its current cautiousness with rates remaining on hold.  

Key Quotes

“Recent high frequency data was soft.  Full-time jobs fell by 31.2k in April, and the participation rate fell 0.3 percentage points to 65.6.  Retail sales excluding autos fell, and the three core CPI measures averaged 1.4% in April.  The renegotiation of NAFTA is expected to begin in August or September, and there is still risks from the US tax reform, where the Republican leadership in the House is still pushing for a border adjustment tax.  The recent downgrade of several Canadian banks and the underlying concerns (the health of household finances) is not a new issue.”

“Speculators in the futures market had a record net and gross short position as of May 16.  We suspect that the price action before the weekend when the US dollar was sold to CAD1.35, its lowest level this month after being unable to resurface above CAD1.36 after the disappointing data, may have spurred a re-think.”