When is the BoC rate 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 1400 GMT this Wednesday. After raising the policy rate by 25bps to 1.50% in July, the central bank is widely expected to stand pat and hence, the key focus would be on the accompanying monetary policy statement.

Analysts at TD Securities explained: “The statement is likely to maintain an upbeat tone and repeat that further tightening will be warranted, in addition to showing comfort with the evolution of data over the last six weeks, which should support market pricing for a rate hike in October.”

How could it affect USD/CAD?

Ahead of the key event, the pair was seen correcting a bit from the 1.3200 handle, near 1-1/2 month tops. Should the central bank stick to its hawkish stance, the pair is likely to slide further below the 1.3155 immediate support towards retesting the 1.3100 round figure mark. The said handle marks a confluence region, comprising of 50-day SMA and a short-term descending trend-channel resistance break-point, and is likely to protect any further downside.

Alternatively, any dovish signals would further weaken the Canadian Dollar and help the pair to build on its positive momentum further towards 1.3270-75 supply zone. A follow-through buying interest has the potential to continue lifting the pair, even beyond the 1.3300 handle, towards challenging yearly tops, around the 1.3380-85 region. 

Key Notes: 

   •  The Bank of Canada Preview: October is better placed for the rate hike as Nafta deal uncertainty weighs

   •  BoC to leave the policy rate on hold at 1.50% - Rabobank

   •  USD/CAD Review: Bulls eyeing a sustained move beyond 1.32 handle, BoC in focus

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.