BOC Up Next
You’d be forgiven for thinking the Bank of Canada meeting today is something of a nonaffair. With the bank having recently signalled its intention to hold rates unchanged, and with no movement on rates expected, on the surface there looks to be little to get excited about. However, against a backdrop of fresh market volatility fuelled by hawkish comments from Fed chair Powell yesterday, today’s meeting might prove a solid opportunity for the loonie.
Divergence Between Fed & BOC
With inflation having fallen back last month in Canada, the expectation is that the BOC will stick to its previous guidance and hold rates unchanged. If seen, this should pave the way for a further breakout higher in USDCAD given the fresh hawkishness we’ve seen from the Fed this week. With markets now pricing in a larger .5% hike from the Fed this month, the widening monetary policy divergence between the Fed and the BOC should keep USDCAD well supported near-term. Additionally, falling oil prices will also put pressure on CAD helping further strengthen bullish sentiment in the pair.
Caution over Labour Market
However, one word of caution over the Canadian labour market. This might be the only fly in the ointment given that a surging labour market poses inflationary risks if growth continues. It will therefore be key to see how the BOC addresses the jobs market. Any concern here might be taken as a sign that the BOC might need intervene again in coming months which could see CAD trading higher from the meeting instead.
Technical Views
USDCAD
The rally in USDCAD has seen the market breaking out above the bear trend line from last year’s highs and above the 1.3683 level. Price is now fast approaching a test of the 1.3839 level next and with momentum studies bullish, the focus is on a break higher here.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.