BOC Keeps Policy Rate Unchanged
21/04/10 21:19
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We had a barn burner of a workshop in Charlotte this past weekend. Thanks to all those who attended and we look forward to hearing of your success. You will now have access to Pro Traders Club where many subscribers have full time traders after taking the time to understand the market and become independent thinkers.
Here is a question i received today, which I have been asked many times...
Q: You always say use no leverage, but how are you going to grow your account with out it???
A: "Traders can take whatever risk profile they desire. I promote "no leverage" as an extreme to drive a point home, realizing that 99% of traders will take on leverage. Of those who I have mentored that have become full time traders, every one has had very tight risk control, leveraged or not. Leverage and over trading are the two main killers of new traders, eliminating the chances of success for perfectly capable and intelligent individuals. Set a good risk profile for yourself. If you can't trade micro lots successfully, you will not trade leveraged capital successfully."
The
BoC kept the policy rate unchanged but removed the
conditional commitment, which heightens the
possibility the hiking cycle will start in June
rather than July. In the previous statement,
officials had removed language on downside risks to
inflation and the latest change lays the groundwork
for a policy shift. The Canadian dollar continues to
be a strong performer in the G10 and the latest BoC
statement lends further support to the currency.
According to the BoC, "the economic recovery is proceeding somewhat more rapidly than the Bank had projected in its January Monetary Policy Report (MPR)." The BoC now sees economic growth of 3.7% in 2010, which reflects, "stronger near-term global growth, very strong housing activity in Canada, and the Bank's assessment that policy stimulus resulted in more expenditures being brought forward in late 2009 and early 2010 than expected."
Despite reiterating the potential for a stronger Canadian dollar and low absolute level of US demand to weigh on Canada's economy, the BoC nevertheless thinks the economy will return to full capacity in Q2 2011.
The conditional pledge language was removed because with "recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus." The timing of the next move still depends on economic activity and inflation, and the CPI release on April 23 will help provide further guidance on timing.
USDCAD dropped below parity following the BoC decision and we think there is further room for the Canadian dollar to perform well. The Canadian dollar has remained the most correlated with the S&P 500 this year but for those concerned that the S&P 500's +8% performance has come on lower volumes, the fact that the BoC looks set to hike the policy rate very soon could mitigate those worries.
Source: Chris Lori, UBS, Bloomberg
According to the BoC, "the economic recovery is proceeding somewhat more rapidly than the Bank had projected in its January Monetary Policy Report (MPR)." The BoC now sees economic growth of 3.7% in 2010, which reflects, "stronger near-term global growth, very strong housing activity in Canada, and the Bank's assessment that policy stimulus resulted in more expenditures being brought forward in late 2009 and early 2010 than expected."
Despite reiterating the potential for a stronger Canadian dollar and low absolute level of US demand to weigh on Canada's economy, the BoC nevertheless thinks the economy will return to full capacity in Q2 2011.
The conditional pledge language was removed because with "recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus." The timing of the next move still depends on economic activity and inflation, and the CPI release on April 23 will help provide further guidance on timing.
USDCAD dropped below parity following the BoC decision and we think there is further room for the Canadian dollar to perform well. The Canadian dollar has remained the most correlated with the S&P 500 this year but for those concerned that the S&P 500's +8% performance has come on lower volumes, the fact that the BoC looks set to hike the policy rate very soon could mitigate those worries.
Source: Chris Lori, UBS, Bloomberg