What’s priced in for the Bank of Canada ahead of Wednesday’s decision

There was a time when the market was pricing in a high likelihood of a Bank of Canada rate hike tomorrow but after months of strong North American data and sticky inflation, those odds have dwindled.

The market currently sees just a 19% chance of a surprise rate cut at Wednesday’s Bank of Canada rate decision. With that, the focus will be on future decisions and communication around what’s coming.

Right now the market is almost evenly-split on the April 10 decision. Pricing suggests a 46% chance of a cut and 54% chance of no move.

However the market is confident that June will be the first month of lower rates with the June 5 decision fully priced for a cut with an 8% chance of 50 bps priced in.

For year-end 2024, the market sees 89 basis points, in cuts, which would put the Bank of Canada at 4.00% or 4.25%, with a slight bias to the lower number.

There are signs of a crack in Canadian consumers and I expect those could translate into job losses in short order. The Bank of Canada will also be keeping a close watch on the busy spring housing market. If it were me, I would be cutting now but central banks want more data.

Critical on that front will be the Canadian jobs report on Friday with expectations currently set at +20K.

This article was written by Adam Button at www.forexlive.com. Source