When is the BoC monetary policy decision and how could it affect USD/CAD?
BoC monetary policy decision - Overview
The Bank of Canada (BoC) is scheduled to announce its latest monetary policy decision at 1500 GMT this Wednesday. The central bank is widely expected to maintain status-quo and leave benchmark policy rates unchanged at 1.75% at its first meeting of 2019. Hence, the key focus will be on the tone of the statement and press conference along with the MPR update.
As analysts at TD Securities note: “Recent disruptions in the energy sector are the key development for the Bank, driving modest downgrades to 2019 growth and a more negative output gap. Still, even with the overnight rate unchanged 1.75%, look for Poloz to reiterate that rates will need to move back to the neutral range, lessening the dovish tone. Housing starts are also released and we forecast a slowing to an annualized 205k (mkt: 206k) in December.”
How could it affect USD/CAD?
Ahead of the key event risk, the pair tumbled to fresh one-month lows but now seems to have found some support ahead of the 1.3200 handle. A hawkish pause might turn the pair vulnerable to extend its recent sharp downfall from over 19-month tops and head towards testing 1.3165 intermediate support en-route the 1.3120 region.
Alternatively, any dovish signals might exert some downward pressure on the Canadian Dollar and prompt some near-term short-covering bounce, lifting the pair back above the 1.3300 handle towards retesting 50-day SMA important support break-point, now turned resistance, near the 1.3320-25 region.
Barring some immediate volatility, the reaction is likely to remain limited as the market focus remains firmly on the upcoming release of the latest FOMC meeting minutes, due later during the US trading session.
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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.