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 15:00 GMT this Wednesday. The BoC is anticipated to maintain status-quo and leave the benchmark interest rate unchanged at 0.25% at the conclusion of the January policy meeting. That said, there have been speculations about the possibility of a ‘micro rate cut’ amid stricter COVID-19 restrictions.
Meanwhile, Joseph Trevisani, FXStreet's own analyst explains: “There has been some media speculation that the Bank of Canada (BoC) might reduce its base rate by an amount less than the standard 0.25%, a so-called micro-cut, in light of the growing drag of the pandemic on performance in 2021. But with analyst expectations nearly uniform for a status quo meeting, that seems unlikely.”
Hence, the key focus will be on the accompanying statement and the post-meeting press conference, where market participants will be looking for any shift in the monetary policy outlook.
How could it affect USD/CAD?
The expected status quo rate decision is unlikely to have any major effect on the USD/CAD pair. However, should the BoC deliver a rate cut or signal one, there is a scope for the Canadian dollar to suffer significant losses.
Ahead of the key event risk, the pair was seen hovering near three-day lows, around the 1.2700 mark. A dovish tilt might be enough to prompt some aggressive short-covering move, which, in turn, might push the pair back towards the 1.2800 mark. Subsequent strength will mark a near-term bullish breakout through a two-month-old descending trend-line resistance and pave the way for additional gains.
Key Notes
• Bank of Canada Rate Decision Preview: No change anticipated in interest rate
• BOC: Odds of ‘micro rate cut’ rise amid covid lockdowns – Reuters
• USD/CAD Price Analysis: Off lows, keeps the red around 1.2700 mark ahead of BoC
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.
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