Scotiabank believe that "CAD..........>

DOLLAR-CANADA: Scotiabank believe that "CAD appears oversold heading into this

week's BoC & we anticipate a modest rebound from current levels. We expect the

BoC to stand pat, we also expect the policy statement to contain a cautiously

optimistic tone which maintains guidance for higher interest rates over time.

BoC rate expectations have softened considerably since early May & are currently

trading below levels prevailing ahead of the April 18 policy decision & MPR

forecast update. OIS are now pricing less than two 25bp rate hikes by Dec &

expectations for the next 25bp hike have been delayed from July to September.

The fade appears somewhat at odds with the recent run of domestic data &

commodity price gains. We think policy makers will have to acknowledge CAD +ve

developments which include a modest improvement in the tone of trade

negotiations, further progress on jobs & wages and a considerable improvement in

terms of trade. We think Wednesday's statement and Thursday's Economic Progress

Report speech will tilt the balance of risks back towards the BoC resuming its

gradual tightening process sooner rather than later. The balance of risk favours

near-term CAD strength."