Waiting for the Bank of Canada
The USD/CAD currency pair is consolidating around 1.0960 ahead of the Bank of Canada rate statement and policy report at 15:00 GMT. Canada’s central bank is widely expected to keep its policy rate steady at 1.00%, but any dovish BOC signals could send CAD to new lows.
In April 2012 under the governance of then-BOC Chief Marc Carney the regulator adopted a hawkish monetary policy outlook. Bank of Canada was expected to become the first of major central banks to raise interest rates. Last October, a couple of months after Steven Poloz replaced Carney, BOC gave up on the hawkish ideas, citing a prolonged period of low inflation. In December BOC sounded even more worried about the deflationary pressures on the economy. Bank’s dovish stance is negative for the Canadian dollar. Loonie is now trading at the lowest level since the year 2009.
Danske Bank: We doubt that today's meeting will change the negative CAD sentiment. In fact, the meeting might underline that the Fed and BoC are moving in different directions this year as BoC might surprise in a dovish way. We continue to see further upside for USD/CAD.
Chart. Weekly USD/CAD