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 15:00 GMT. The Canadian central bank said in January that if economic developments evolve broadly in line with the outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases. Having raised interest rates eight times since the first quarter of 2022, the BoC is now expected to leave the overnight rate unchanged at 4.5%. Investors will further take cues from the accompanying monetary policy statement in the absence of the post-meeting press conference.

Analysts at TD Securities (TDS) offer a brief preview of the event and write: “The downside surprise on Q4 GDP should allow the BoC to look past the blockbuster January jobs number and keep the overnight rate unchanged at 4.50%. The forward guidance is not expected to change too much from January, though the BoC might want to put more emphasis on the conditional nature of its pause.”

How Could it Affect USD/CAD?

Ahead of the key central bank risk, the USD/CAD pair holds steady near a four-month high touched earlier this Wednesday amid sustained US Dollar buying and a softer tone surrounding Crude Oil prices. Given that the markets have been expecting the BoC to keep rates unchanged, the announcement is unlikely to provide any meaningful impetus to the major. That said, the near-term policy outlook should infuse some volatility around the Canadian Dollar and allow traders to grab some meaningful opportunities.

From a technical perspective, the overnight sustained strength beyond the 1.3700 mark was seen as a fresh trigger for bullish traders. That said, the Relative Strength Index (RSI) on the daily chart is on the verge of breaking into the overbought territory. This makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move.

The USD/CAD pair, however, still seems poised to prolong the upward trajectory towards reclaiming the 1.3800 round figure. The momentum could get extended further towards an intermediate hurdle near the 1.3870-1.3880 region en route to the 1.3900 mark and the 2022 swing high, around the 1.3975-1.3980 zone.

On the flip side, the 1.3700 strong resistance breakpoint now seems to protect the immediate downside. Any subsequent pullback is more likely to attract fresh buyers and remain limited near the 1.3655-1.3650 region. The latter should act as a strong base for the USD/CAD pair.

Key Notes

 •  Bank of Canada Preview: Canadian Dollar set to climb on hawkish hold, market positioning

 •  BoC Preview: Forecasts from seven major banks, leaving rates on hold

 •  USD/CAD Forecast: Bulls now await BoC policy decision before placing fresh bets

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.