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 monetary policy decision this Wednesday at 14:00 GMT. The Canadian central bank is widely expected to leave the overnight interest rate unchanged at 4.5% for the second straight meeting. Most analysts say the central bank will need more time to assess how the economy responds to the eight rate hikes it has delivered over the past year. Hence, the focus will be on the accompanying monetary policy statement, which will also include the updated economic projections, 
and the post-meeting press conference at 15:00 GMT.

Dhwani Mehta, Senior Analyst and Asian Session Manager at FXStreet, explains: The BoC’s view to stay on hold this month is backed by cooling inflation. The country’s annual Consumer Price Index (CPI) rate fell to 5.2% in February, marking the second month in a row inflation came in lower than forecast, as supply chains recover and commodity prices moderate. It’s worth noting that the monthly data shows inflation is actually closing on the Bank’s inflation target of 2%.

How Could It Affect USD/CAD?

The USD/CAD pair gains some positive traction on Wednesday and moves back closer to the 1.3500 psychological mark amid some repositioning trade ahead of the key central bank event risk. Given that the markets are already expecting the BoC to keep rates unchanged, the announcement is unlikely to provide any meaningful impetus to the major and is likely to be overshadowed by the US CPI-inspired volatility. That said, the near-term policy outlook should influence the Canadian Dollar and allow traders to grab some meaningful opportunities.

From a technical perspective, any subsequent recovery beyond the 1.3500 mark is likely to confront some resistance near the 1.3525-1.3530 region. A convincing breakthrough the latter will trigger a short-covering move and assist the USD/CAD pair to reclaim the 1.3600 round-figure mark. Spot prices could climb further to the next relevant hurdle near the 1.3660-1.3665 horizontal support breakpoint, now turned resistance.

On the flip side, bearish traders need to wait for a sustained break below an upward sloping trend-line extending from the August 2022 swing low. This is closely followed by the very important 200-day Simple Moving (SMA), currently around the 1.3400-1.3390 region. Some follow-through selling will confirm a fresh breakdown and make the USD/CAD pair vulnerable to accelerate the fall towards the 1.3315 intermediate support en route to the 1.3300 mark and the 1.3270-1.3265 horizontal zone.

Key Notes

 •  Bank of Canada Preview: Sitting on the sidelines amid looming recession risks

 •  BoC Preview: Forecasts from eight major banks, staying on the sidelines

 •  USD/CAD Analysis: Holds above ascending trend-line, 200 DMA ahead of key data/event risks

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.