CAD soft into BoC despite expectations for hold - Scotiabank

The Canadian Dollar (CAD) is soft, entering Wednesday's NA session with a marginal decline as market participants look to the 9:45am ET Bank of Canada rate decision, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Markets look to tone, MPR

"A hold (2.75%) is widely anticipated and risk lies with the statement tone, Monetary Policy Report, and press conference. Policymakers face a difficult task, as they balance the risks of continued trade policy uncertainty against the challenges of persistent underlying inflationary pressures. This week's CAD weakness appears to be driven by sentiment, and we note the recent widening in risk reversals implying a rise in the premium for protection a decline in CAD."

"Our FV estimate has offered little in terms of direction, and remains steady in the lower 1.36s (currently 1.3633). The recent range has been broken, with a clear push above anticipated resistance around 1.3750. The break followed the prior violation of 50 day MA resistance and now shifts our focus to the 1.3800-1.3850 congestion area from late April/early May."

"The RSI is now firmly in bullish territory and pushing toward 60, offering ample room for further upside ahead of the overbought threshold at 70. We look to a near-term range bound between 1.3750 support and 1.3850 resistance."