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 and is widely anticipated to leave its benchmark interest rates unchanged at 0.25%. Keep in mind, that the BoC became the first major central bank to cut back on its pandemic-era stimulus program at the April meeting. The central bank also brought forward the guidance for the first interest rate hike to the second half of 2022. Investors are now eagerly waiting to see what the next card of the tightening process could be. Hence, the key focus will be on the accompanying rate statement.

How Could it Affect USD/CAD?

Market expectations for any kind of monetary shift or a hawkish surprise are low as the central bank weighs progress on vaccinations and rising inflationary pressures against weak economic data. This, in turn, suggests that the market reaction to the announcement is more likely to be limited.

Heading into the key event risk, the USD/CAD pair was trading with modest intraday losses around the 1.2080 region. Rallying crude oil prices continued underpinning the commodity-linked lookie and exerted some downward pressure on the major. The next relevant support is pegged near the 1.2060-55 region, below which bears are likely to aim back to challenge multi-year lows, around the key 1.2000 psychological mark.

On the flip side, the 1.2115-20 region now seems to have emerged as an immediate hurdle. Sustained move beyond might trigger a short-covering move and push the pair further beyond the 1.2140-45 supply zone, towards the 1.2200 round-figure mark. The momentum could get extended and allow the pair to test a horizontal support breakpoint, now turned resistance near the 1.2260-65 region.

Key Notes

 •  Bank of Canada Preview: QE reduction to continue later in 2021

 •  USD/CAD Forecast: Not out of the woods yet, BoC eyed for some meaningful impetus

 •  USD/CAD remains depressed below 1.2100 mark amid rallying oil prices, 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.