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 Canadian central bank is widely anticipated to leave its benchmark interest rates unchanged at 0.25% at the conclusion of the March policy meeting. Hence, the key focus will be on the accompanying statement, where market expectations will be looking for any kind of a shift in the monetary policy outlook.

How Could it Affect USD/CAD?

The BoC could disappoint some investors and is unlikely to show any urgency to raise interest rates. That said, the central bank could give hints about the next move to taper bond purchases. This, in turn, will play a key role in influencing the Canadian dollar.

As FXStreet's own analyst, Yohay Elam explains: “While no change is expected from Ottawa at this juncture, the mere reluctance to act forcefully against a steepening Canadian yield curve, may unleash fresh loonie strength.”

Ahead of the key event, the USD/CAD pair was seen trading with modest gains amid renewed US dollar buying interest. The pair, however, remains confined in a two-week-old trading range, awaiting fresh catalyst before the next leg of a directional move.

In the meantime, any move beyond the 1.2700 mark might continue to face stiff resistance near the 1.2740-50 heavy supply zone. A sustained move beyond will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent recovery from multi-year lows. The momentum might then push the pair further beyond the 1.2800 level, towards challenging YTD tops near the 1.2880 region.

On the flip side, the 1.2600-1.2590 region might continue to protect the immediate downside. Some follow-through weakness below monthly swing lows, around the 1.2575 region might prompt aggressive technical selling. This would turn the pair vulnerable to accelerate the slide towards the key 1.2500 psychological mark before eventually dropping to retest multi-year lows, around the 1.2470-65 region touched on February 25.

Key Notes

  •  Bank of Canada Preview: Three reasons why the BOC may unleash C$ strength

  •  Bank of Canada preview: Time to taper?

  •  USD/CAD posts modest daily gains around 1.2650 ahead of BoC policy announcements

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.