BOC hikes rates by 75bps, more to come!
How much higher will the BOC raise rates? It will depend on the effects of tighter monetary policy as it works its way through the economy.
Share this:
The Bank of Canada hiked rates by 75bps to 3.25%, as expected. In addition, the statement noted that “given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further.” How much higher will they raise rates? The BOC said that it will depend on the effects of tighter monetary policy as it works its way through the economy, but that it is committed “to price stability and will continue to take action as required to achieve the 2% inflation target”. The BOC also noted that it will continue with its quantitative tightening program. At the same time as the BOC announcement, Canada released its Ivey PMI for August. The seasonally adjusted print was 60.9 vs an expectation of 48.8 and a prior reading of 48.6, below the expansion/contraction level of 50! August’s print was a huge jump for the manufacturing PMI and indicates that the economy is still strong despite higher rates.
As the rate hike was in-line with expectations and the statement seems to lack new information, USD/CAD has been fairly quiet since the announcement. As mentioned in out Bank of Canada preview, USD/CAD had been in a rising channel since early April. After trading to a local high of 1.3224 on July 14th, the pair pulled back to the other side of the channel near 1.2728. Since then, USD/CAD has been on a tear and today reached its highest level since that July 14th high at 1.3208.
Source: Tradingview, Stone X
On a 240-minute timeframe, first resistance is very close to today’s high at 1.3234. Above there, price can move to horizontal resistance from the November 4th, 2020 high at 1.3299 and then the top, upward sloping trendline of the channel near 1.3375. However, if USD/CAD moves lower, the first support is at long-term horizontal support of 1.3077 and then the lows of August 25th at 1.2895. If price breaks below there, the next support level is the bottom, upward sloping trendline of the channel near 1.2790.
Source: Tradingview, Stone X
Will USD/CAD continue to move higher even with a 75bps hike today and the BOC noting that there is more rate increases to come? It may depend on the next catalyst. Canada reports its Employment Change on Friday. Expectations are for a small increase of 15,000 vs a terrible print from June at -30,600. A weaker print could push the pair higher.
The Bank of Canada hiked rates by 75bps to 3.25%, as expected. In addition, the statement noted that “given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further.” How much higher will they raise rates? The BOC said that it will depend on the effects of tighter monetary policy as it works its way through the economy, but that it is committed “to price stability and will continue to take action as required to achieve the 2% inflation target”. The BOC also noted that it will continue with its quantitative tightening program. At the same time as the BOC announcement, Canada released its Ivey PMI for August. The seasonally adjusted print was 60.9 vs an expectation of 48.8 and a prior reading of 48.6, below the expansion/contraction level of 50! August’s print was a huge jump for the manufacturing PMI and indicates that the economy is still strong despite higher rates.
Everything you need to know about the BOC
As the rate hike was in-line with expectations and the statement seems to lack new information, USD/CAD has been fairly quiet since the announcement. As mentioned in out Bank of Canada preview, USD/CAD had been in a rising channel since early April. After trading to a local high of 1.3224 on July 14th, the pair pulled back to the other side of the channel near 1.2728. Since then, USD/CAD has been on a tear and today reached its highest level since that July 14th high at 1.3208.
Source: Tradingview, Stone X
Trade USD/CAD now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
On a 240-minute timeframe, first resistance is very close to today’s high at 1.3234. Above there, price can move to horizontal resistance from the November 4th, 2020 high at 1.3299 and then the top, upward sloping trendline of the channel near 1.3375. However, if USD/CAD moves lower, the first support is at long-term horizontal support of 1.3077 and then the lows of August 25th at 1.2895. If price breaks below there, the next support level is the bottom, upward sloping trendline of the channel near 1.2790.
Source: Tradingview, Stone X
Will USD/CAD continue to move higher even with a 75bps hike today and the BOC noting that there is more rate increases to come? It may depend on the next catalyst. Canada reports its Employment Change on Friday. Expectations are for a small increase of 15,000 vs a terrible print from June at -30,600. A weaker print could push the pair higher.
Learn more about forex trading opportunities.
Related tags:
Latest market news
The complete CFD trading experience
Award-winning platforms, competitive spreads, low commissions and dedicated support.
We live and breathe the markets and are dedicated to helping traders realise their ambitions as we continue to set the industry bar.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Gold Outlook: XAU/USD hit hard as US yields, dollar resume ascent
A stronger dollar, surging front-end yields and renewed geopolitical tension have combined to push gold back towards key technical support.
EUR/USD weekly outlook: Oil, inflation and NFP in focus
After coming under significant pressure in recent weeks, the EUR/USD came off its lows to finish the week on a positive note on Friday, albeit with only a mild rebound. That was not enough to prevent the exchange rate falling for the third consecutive week, as the US dollar and bond yields rallied across the board.
USD/JPY Weekly Outlook: Payrolls loom as US rates remain the dominant driver
Strong US growth and hawkish Fed pricing continue to support USD/JPY, while intervention risk appears to be kicking in at lower levels
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.