Scotiabank note that markets are......>

DOLLAR-CANADA: Scotiabank note that markets are fully pricing in a 25bp Bank of

Canada (BoC) rate hike on Wednesday and suggest that "the CAD appears somewhat

vulnerable heading into a risk event that will include a statement, Monetary

Policy Report (MPR), and press conference from Gov. Poloz and Sr. Dep. Gov.

Wilkins. Communication risk is elevated as Gov. Poloz will need to balance

positive developments on trade (NAFTA/USMCA) and sentiment (Business Outlook

Survey) against weaker global growth prospects and record (CAD-bearish) oil

price differentials. If the 'gradual approach' language is retained, tightening

expectations for 2019 may moderate. The CAD is also looking technically

vulnerable on the charts. We think USD sellers should consider waiting to hedge

near-term receivables. USD buyers should hedge USD near-term payables around

current levels. Canadian institutional investors should remain underweight the

USD relative to benchmarks and we think short-term gains to C$1.33/1.34 will

provide an opportunity to add or extend hedges."