BOC on Watch

Today’s BOC meeting is drawing plenty of attention, particularly on the back of recent unexpected interest rate hikes from the RBA. While the BOC has been on hold since its last .25% hike in January, the bank has repeatedly signalled that it stands willing to hike rates again if/when necessary. Recently, expectations of a fresh BOC hike have started to creep back into focus with some players now pegging an outside chance of a hike at this meeting, or at least a more hawkish signal, paving the way for a hike in July.

Economic Resilience

The key issue facing the BOC currently is that the economy hasn’t cooled as expected. The BOC itself was looking for a mild recession into the middle of this year which, as we’ve seen in the US, has not materialised. Instead, the labour market remains strong and inflation, which had been falling steadily, rebounded higher in April. With the swaps markets already pricing in a hike by July, the question for the BOC will be whether to pull the trigger now or wait another month but risk conditions becoming more unfavourable. As such, there are bullish risks for CAD into today’s BOC meeting.

Technical Views

EURCAD

The reversal lower from the 1.5098 level highs has seen the market breaking down through key support at the 1.4612 level, as well as the bullish trend line from 2022 lows. Price is fast approaching a test of the 1.4240 level next and, with momentum studies bearish, the focus is on a push lower while we hold below the trend line with deeper support at 1.3766 the next focus for bears.