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 decision at 15:00 GMT this Wednesday. The central bank, at its February meeting, is widely expected to maintain status-quo and leave benchmark policy rates unchanged at 1.75% and hence, the key focus will be on the tone in the accompanying policy statement. 

In the view of the Barclays Research Team: The downside risks to the outlook that had been identified by the monetary policy committee remain lower oil prices that have weighed on the energy sector, business investment and headline inflation; uncertainty about global trade and risks of further protectionism; and indebted households and slowing housing market. 

How could it affect USD/CAD?

Ahead of the key event risk, the pair steadily climbed to two-month tops and has now moved within striking distance of reclaiming the 1.3400 handle. Any dovish signals might exert some additional downward pressure on the Canadian Dollar and push the pair further towards its next resistance near the 1.3440-45 region. A follow-through buying has the potential to continue lifting the pair further towards reclaiming the key 1.3500 psychological mark.

Alternatively, any meaningful retracement below mid-1.3300s, led by hawkish outlook, now seems to find decent support near the 1.3300 handle, which if broken might prompt some additional long-unwinding trade and accelerate the fall further towards the 1.3240-35 horizontal support.

Key Notes

    • The Bank of Canada Preview: Sharp economic downturn set to press BoC into the dovish corner

   •  BoC Preview: Major Banks expecting no fireworks today

   •  USD/CAD Technical Analysis: Hits 2-month tops, bulls eyeing 1.3400 mark ahead of BoC

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.