Risk-reward unattractive for CAD longs into BoC - BNPP

Analysts at BNP Paribas suggests that risk-reward favours taking profit on any long CAD positions ahead of BoC meet, as a hike is now fully priced by the markets.

Key Quotes

“We expect the Bank of Canada to hike rates by 25bp at their meeting Wednesday, after the hawkish shift in communications from Governor Poloz and other BoC policy makers.  Ahead of the meeting however, we think risk-reward favours taking profit on any long CAD positions, as a hike is now fully priced. There is a risk that the Bank of Canada could deliver a dovish hike and play down the chance of further rate hikes this year. BNP Paribas FX Positioning Analysis now signals that the market has switched to a long CAD position, so in our view, a dovish hike could lead USDCAD to break back above 1.30.”