Explore eFXplus Derived Data That Drive Results
A Data Partner of:
Refinitiv
Mar 01 - 10:55 AM

BofA: Quant Model Triggers Bullish GBP/CAD Signal Ahead of Next Week's BoC

By eFXdata  —  Mar 01 - 09:30 AM

Synopsis:

Bank of America's quantitative models have triggered a bullish signal for GBP/CAD, particularly in anticipation of the upcoming Bank of Canada (BoC) meeting. This bullish stance is supported by the positioning model's derived Residual Skew, indicating a favorable outlook for GBP/CAD calls. The upcoming BoC meeting is expected to potentially set the stage for future rate cuts, contrasting with the UK's relatively high core inflation and the market's more conservative rate cut expectations in Canada for the first half of 2024.

Key Points:

  • Bullish GBP/CAD Signal: BofA's MAA positioning model indicates a short-term bullish signal for GBP/CAD, suggesting an uptrend supported by Residual Skew towards GBP/CAD calls.

  • BoC Meeting Expectations: The market anticipates the BoC might hint at upcoming rate cuts, possibly as early as April, though BofA's base case predicts the first cut in June.

  • UK vs. Canada Rate Divergence: The UK's core inflation remains elevated compared to Canada, leading to fewer rate cuts priced in the UK for the early part of 2024. This divergence aligns with BofA's Global rates team's recommendation to favor UK rates over Canada in the front end.

Conclusion:

BofA's quantitative models suggest a bullish outlook for GBP/CAD, particularly in light of divergent monetary policy expectations between the Bank of Canada and the Bank of England. The anticipation of dovish signals from the BoC contrasts with the UK's inflation scenario, underpinning the bullish GBP/CAD stance. However, unexpected developments in Canadian wage growth could pose risks to this outlook.

Source:
BofA Global Research

Subscription

  • eFXplus
  • End-user license agreement (EULA)

About

  • About
  • Contact Us

Legal

  • Terms of Service
  • Privacy Policy
  • Disclaimer
© 2024 eFXdata · All Rights Reserved
!