As universally anticipated, the Bank of Canada left its main interest rate unchanged at 1.75% today.
In its accompanying statement, the central bank reiterated that the accommodative policy is warranted and that economic data was coming in as projected. While the BOC did acknowledge that growth has firmed of late, policymakers seemed hesitant to embrace the better domestic data given the clear risks to global trade.
From a technical perspective, USD/CAD has broken out of its sideways range to hit a nearly 5-month high above 1.3500. While rates have faded slightly off the intraday highs as we go to press, a close near current levels would help confirm the breakout and potentially signal a continuation back toward the 1-year highs in the mid-1.3600s:
Source: TradingView, City Index
Beyond a confirmed daily close, readers should monitor for a breakout in the RSI indicator, which has been trapped in a tight range of its own for months. If the RSI can turn meaningfully higher, it would show growing bullish momentum behind the move.
Looking ahead, both the US (Thursday) and Canada (Friday) will release (stale) GDP figures. These releases, in addition to any big moves in the price of oil, may determine whether USD/CAD can build on today’s BOC-driven gains.