Bank of Canada Rate Decision - Will They Cut Tomorrow?
Joe Perry September 3, 2019 3:03 PM
The BOC has remained cautious amid trade tensions and a global slowdown.
A few weeks ago, we had been monitoring the Bank of Canada and wondering if it was time for them to jump in the pool with the rest of the major central banks around the world and begin cutting rates, or at the very least, turn dovish. Major data points for Canada up until this Friday, had been better than expected, as the July Inflation Rate (MoM) was 0.5% vs 0.2% expected and the July Retail Sales (MoM) was 0% vs -0.1% expected. Even GDP was better on Friday. However, also on Friday we saw the first dents in the armor, as PPI and Raw Materials came in much worse than expected. These are considered leading indicators of the economy, as they are the first price component which later gets passed through to the consumer.
The last BOC Policy Interest Rate Decision was on July 10th, where they held rates unchanged at 1.75%. Expectations are for the BOC to leave rates unchanged once again at 1.75%. The last time the BOC moved on interest rates was October 2018, in which they HIKED 25bps. Although the BOC projects GDP growth to be 1.3% in 2019 and about 2.0% in 2020, they have remained cautious amid trade tensions and a global slowdown. The next full update of the Bank’s economy and outlook will not be until the October 30th meeting, so the bank may be likely to carry on with its “appropriate” language and continue to “monitor the data” until then.
We have been monitoring price action in the USD/CAD and waiting patiently for it to meaningfully break above the resistance zone from the horizontal resistance at 1.3345 and the 61.8% retracement from the high on May 31st to the low on July 19th, which is 1.3357 Today we finally moved higher, pushing to a high of 1.3382.
Source: Tradingview, FOREX.com
However the US ISM Manufacturing PMI released this morning came out worse than expected, creating a false breakout and the pair moved back below that important zone. Yesterday and today, USD/CAD was bought in the morning and sold in the afternoon, creating two shooting stars on a daily candlestick chart.
Source: Tradingview, FOREX.com
If the BOC is more hawkish tomorrow, watch for USD/CAD to remain under the 1.3345/1.3357 resistance zone, and trade back into the range. If they are more dovish, there is room for the pair to trade up towards 1.3500.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.