3 Points to Remember before Trading the BOC’s Policy Statement

Can’t get enough of news trading? Yesterday we listed down the top-tier catalysts you need to watch out for if you’re trading the British pound.

This time around we’re setting our sights on the Bank of Canada (BOC)’s monetary policy decision. Here are three points you need to remember if you’re planning on trading the event:

No policy changes in September

Despite skipping a meeting in August, the BOC didn’t feel any pressure to up its stimulus game in September. The central bank decided to keep its overnight rate at 0.50%, bank rate at 0.75%, and its deposit rate at 0.25%.

Stephen Poloz and his gang didn’t shy away from dovish remarks though! For starters, the central bank acknowledged that growth in the first half of the year is not as rosy as it had estimated in May. They also called the weakness in Q2 2016 growth due to drops in oil exports and the wildfires in Alberta.

They were more generous about inflation, saying that it’s still “roughly” in line with its expectations. However, they also recognized that lower consumer energy prices have tilted inflation risks to the downside. Last but not the least, the BOC is expecting a rebound in Q3 2016 as oil production picks up, Alberta recovers from the fires, and consumer spending gets a boost.

The Loonie fell across the board

Apparently, market players didn’t care for the BOC’s dovish remarks. Much like in the July, the central bank’s dovishness set the tone for the Loonie’s price action in the next trading sessions.

BOC's Decision in July (1-hour CAD charts)

BOC’s Decision in July (1-hour CAD charts)

It also didn’t help that Canada’s lower-tier reports like building permits and capacity utilization printed to the downside the day after the BOC’s statement. As a result, the Loonie’s downtrend was sustained until the end of the week.

BOC’s Decision in September (1-hour CAD charts)

BOC’s Decision in September (1-hour CAD charts)

No changes are expected this month

Tomorrow at 2:00 pm GMT the BOC will publish its decision, which will be followed by a presser at 3:15 pm GMT. Analysts aren’t expecting any changes from the central bank but this doesn’t mean that forex traders won’t pay attention!

Oil prices have risen since the central bank’s last meeting, which should provide some cushion against more rate cuts despite a downside surprise in the latest CPI report. Then, market players will also look for clues on the BOC’s 2017 growth forecasts after expressing concern over its weaker-than-expected exports and sluggish growth in the U.S.

If the BOC hints at relief over the recovery in oil prices and optimism over Canada’s economic activity in the next quarters, then we might see more Loonie rallies across the board.

But if the BOC sticks to form and releases another dovish statement or hints at further easing down the road, then the Canadian dollar may shrug off some of its oil-related gains and inspire a bearish trend until the next U.S. trading session.

Oh, and keep an eye out for any oil-related news updates, will ya? Don’t forget that market-moving news on the Black Crack could always override any not-so-significant announcement from the central bank!


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