BoC Monetary Policy Decision – Overview
The Bank of Canada (BoC) is scheduled to announce its latest monetary policy update at 14:00 GMT this Wednesday and is widely anticipated to leave its monetary policy settings unchanged. At its meeting on July 14, the BoC decided to reduce the target of bond purchases from C$3 billion to C$2 billion per week amid expectations that the economy would continue to strengthen. However, weaker data over the past month – especially a surprise economic contraction in Q2 – has been fueling speculations that the central bank could turn dovish.
How Could it Affect USD/CAD?
Given the proximity of Canada's federal elections on September 20, the chances of a major shift in the policy stance are low. The BoC could opt to adopt a more cautious tone, though is likely to retain its forecast for the first-rate hike in H2 2022. This, in turn, suggests that the decision is unlikely to be a major game-changer for the USD/CAD pair.
Meanwhile, Eren Sengezer, Editor FXStreet, offered a brief technical outlook for the USD/CAD pair: "In case the BoC delivers a dovish statement, the CAD is likely to weaken its major rivals. On the upside, the initial resistance is located at 1.2600 (20-day SMA) ahead of 1.2650 (Fibonacci 23.6 retracement of June-September uptrend). A daily close above the latter could open the for additional gains toward 1.2700 (psychological level) and 1.2750 (static level). Supports, on the other hand, are located at 1.2530 (200-day SMA), 1.2500 (psychological level, static level) and 1.2430 (Fibonacci 38.2% retracement)."
Key Notes
• Bank of Canada Preview: No policy change expected following July's taper
• BoC Preview: Forecasts from eight major banks, no policy change expected
• USD/CAD to see little upside on unchanged BoC – MUFG
About the BoC Interest Rate Decision
BoC Interest Rate Decision is announced by the Bank of Canada. If the BoC is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the CAD. Likewise, if the BoC has a dovish view on the Canadian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
