CAD & NZD: Central banks in focus as FX markets hunt for policy plays - ING

According to Viraj Patel, Research Analyst at ING, the focus today will be on BoC Governor Poloz's speech; it'll be the first time that we hear from the BoC chief since the central bank's second successive rate hike this month and suggests that they wouldn't be too surprised to hear caution over the prospects of additional near-term tightening.

Key Quotes

“We believe that a pause in the BoC's hiking cycle may be warranted and a more dovish Poloz could see the ~70% probability of a December BoC rate hike priced out as markets push back expectations of the next policy move. Risks are for the USD/CAD retrace to push up towards 1.2470 (23.6% Fibo level); a more pronounced correction could even bring in the OECD PPP fair value level at 1.27, which is our year-end target.”

“In New Zealand, the RBNZ will temporarily be in the spotlight amid the backdrop of political uncertainty. We expect the Sep policy statement (2100 BST) to repeat the reference on “a lower NZD is needed” – but a cautious RBNZ bias may have muted impact on the kiwi given that the first hike isn’t priced in until Sep-2018.”