The wait for China's response has put markets in a coma

Traders are now in "damned if you do, damned if you don't" position basically. Fade the trade rhetoric now, and when China's response hits then everything unravels again. Move the risk-off scale further down the road too far and if China doesn't announce anything or falls short of escalating its countermeasures then the market is just going to fade it again.

I'd imagine equal tariffs and levies are the lightest form of retaliation that China can take, and the market will fade that eventually. But if they choose to opt for a different route like business restrictions to tag along with tariffs then that's something new that could see further risk-off tones.

But for now, it's all conjecture since there is no response by China yet!

So, let's look towards the Bank of Canada meeting that is to come later today instead. A rate hike today is pretty much done and dusted with the market leaning towards a dovish hike but Poloz has made clear his intentions that the central bank is just about capable of anything at any meeting. So, it'll be hard to identify what signals they may send this meeting despite the rate hike.

Pretty much everything goes in the arguments in favour of a dovish or hawkish hike and there's no wrong basically. And it comes from the fact that Poloz has confused markets, something which Adam talked about in depth here.

And that is why the loonie has been relatively quiet in trading over the past week. Despite the bounce in risk sentiment since Friday to Tuesday, the loonie barely budged even with improving oil prices. And today's risk off tone only sees the loonie fall 0.3% against the dollar, and that also owes to the fact that oil prices have been taking a bit of a hit today.

The lack of movement and indecision here is a testament to what the Bank of Canada has set up the market to believe. As for the statement itself, I reckon Poloz will talk things down and then only build up the next rate hike when he sees the need to - that's better than having to backtrack like what the BOE did in April. Either way, your guess is pretty much as good as mine considering how Poloz has managed things so far.

Here's a bunch of previews to wrap your head around ahead of the meeting: