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 update at 14:00 GMT this Wednesday. The BoC is widely expected to maintain status-quo and leave its benchmark interest rates unchanged at 0.25% at the conclusion of the September policy meeting. Hence, the key focus will be on the accompanying monetary policy statement, where investors will look for signs that BoC could lean towards shifting the policy objective towards a more dovish approach similar to Fed’s new flexible average inflation targeting.

How could it affect USD/CAD?

Ahead of the key event risk, the USD/CAD pair witnessed a modest intraday pullback of around 45 pips from the 1.3260 region, or the highest level since August 17 set earlier this Wednesday. Hints of lower rates for longer are set to drive the flows away from the Canadian dollar, which, in turn, should assist the pair to build on its recent bounce from multi-month lows, levels just below the key 1.3000 psychological mark.

That said, bulls might still wait for some follow-through buying beyond the 1.3260 area before placing fresh bets. The pair might then aim to reclaim the 1.3300 mark before eventually climbing to 50-day SMA resistance near the 1.3335-40 region.

On the flip side, any meaningful slide below the 1.3200 mark might find decent support near the 1.3165 region. That said, sustained weakness below will negate the positive bias and turn the pair vulnerable to resume its prior/well-established bearish trend.

Key Notes

  •  Bank of Canada Rate Decision Preview:  Inflation worries and the zero bound

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  •  USD/CAD analysis: Two scenarios likely

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.