The BOC is up in a few hours and markets are betting on some tapering from the central bank.
How will the decision affect USD/CAD?
Before moving on, ICYMI, today’s Daily Asia-London Session Watchlist looked at GBP/AUD’s chart favoring the bears ahead of Australia and the U.K.’s data releases. Be sure to check that out to see if there is still a potential play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
- Australian retailers boast strong March sales as consumer confidence soars
- AUD, NZD ease from one-month highs, bonds gain
- Asian shares, oil hit by coronavirus risks to outlook
- Japan weighs state of emergency for Tokyo, Osaka regions amid virus surge: media
- UK inflation rises to 0.7% in March as clothing and fuel prices grow
Upcoming Potential Catalysts on the Economic Calendar:
- BOE Governor Bailey to give a speech at 10:30 am GMT
- Canada’s CPI at 12:30 pm GMT
- BOC’s policy decision at 2:00 pm GMT
- EIA’s crude oil inventories at 2:30 pm GMT
- BOC’s presser at 3:00 pm GMT
What to Watch: USD/CAD
USD/CAD is consolidating just under the 1.2625 mark that has been a key inflection point for the pair so far this year.
Will the pair turn lower today?
All eyes will be on the Bank of Canada (BOC)’s April policy decision. Word around is that central bank members will keep their interest rates steady but also taper their asset purchases after going to town on the bond market in the last year.Volatility will likely come from BOC’s determination to limit CAD’s gains as they announce their tapering.
Markets have priced in higher GDP forecasts, hotter inflation, and optimistic outlook for the U.S. economy and crude oil demand. Unless BOC members surprise us with more uncertainty and a “lower for longer” interest rate plan, then CAD will continue to remain supported against its major counterparts.
Higher GDP forecasts and not-so-aggressive jawboning could drag USD/CAD to the 1.2575 or 1.2550 levels. MarketMilk tells me that USD/CAD’s average volatility can make the trip possible.
But if markets mostly shrug off BOC’s statements, or if traders pay more attention to themes like global lockdowns and rotation into safe-havens, then USD/CAD could break above 1.2625 to retest the 1.2640 or 1.2675 previous resistance levels.