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Bank of Canada likely to keep policy rates on hold in October

The Bank of Canada is likely to keep its policy rates on hold tomorrow, noted TD Economics in a research report. Market reaction is expected to hinge on significant elements of the communiqué, particularly the output gap and characterization of recent data.

The output gap is expected to continue to close by the end of this year, supported by the upward revisions to the economic growth. Positive data, from business confidence and housing to wages and core inflation also call for the data-dependent central bank to present a more positive message than in their latest communications.

“But in light of Poloz’s defiantly neutral tone of late and uncertainty over potential output and NAFTA, the risk of a major dovish re-pricing in rate hike expectations is nontrivial in our view”, added TD Economics.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at -47.3047, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -7.55763. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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