Central Bank Watch: BOC, RBA, RBNZ Interest Rate Expectations Update


In this edition of Central Bank Watch, we’re examining the rates markets around the Bank of Canada, Reserve Bank of Australia, and Reserve Bank of New Zealand. Nearing the end of May, we have the RBNZ on the immediate event horizon, while both the RBA and BOC won’t be meeting again until early-June. After some tinkering in the recent past, it now appears that all three of the commodity currency central banks are on the straight and narrow path of keeping policy on hold for the foreseeable future.


The BOC meets next week for its June policy meeting the second week of the month, leaving a bit more time before CAD-crosses bring a more intense focus to the central bank. Having already tinkered with its QE program (so it doesn’t run into its self-imposed statutory limit), the BOC now appears that it will keep its main policy in place for the next several months. In fact, on Monday, BOC Governor Tiff Macklem expressed confidence in the decision to begin withdrawing stimulus, reaffirming the perception that the BOC has a somewhat hawkish bias relative to its other major peers.

Bank of Canada Interest Rate Expectations (May 25, 2021) (Table 1)

Central Bank Watch: BOC, RBA, & RBNZ Interest Rate Expectations Update

Shifts in Canadian global bond yields may be leading to some temporary quirky pricing thanks to shifting expectations. For example, there is a 29% chance of a 25-bps rate hike by the October meeting, but then there is a 33% chance of a 25-bps rate cut by the end of the year. The BOC has made clear its content with its decision to taper; it remains the case that further action along the interest rate channel remains highly unlikely.


Central Bank Watch: BOC, RBA, & RBNZ Interest Rate Expectations Update

USD/CAD: Retail trader data shows 81.21% of traders are net-long with the ratio of traders long to short at 4.32 to 1. The number of traders net-long is 4.76% higher than yesterday and 8.62% higher from last week, while the number of traders net-short is 7.08% lower than yesterday and 2.10% higher from last week.

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