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Gather ’round, Loonie traders! This week could be a particularly volatile one for the Canadian currency with the Bank of Canada’s interest rate decision lined up on May 24, 3:00 pm GMT. Here’s what you need to know if you’re trading this top-tier event.

1. Economic data has been mixed

A quick rundown of the latest batch of economic reports usually does the job in gauging whether or not a central bank is about to adjust its monetary policy bias, but things are looking trickier this time around. My Canadian Economic Snapshot has shown a somewhat even mix of red and green as growth and business sentiment have been slightly upbeat while inflation has fallen short of estimates.

In particular, headline CPI came in at 1.6% year-on-year in March and April, short of the BOC target of 2% inflation and their forecast at 1.7% by the end of Q2. To top it off, two out of three core measures that the BOC keeps close tabs on have been trending lower, so policymakers might highlight the downside pressures in their upcoming statement.

Moreover, the pace of jobs growth has slowed in April while underlying components have revealed that full-time hiring has actually dropped and that the gains were shored up by part-time employment. Although the headline unemployment rate ticked down, it was mostly due to lower labor force participation. Also, average hourly earnings edged 0.15% down to indicate falling wages.

2. April statement was neutral

BOC Governor Poloz and his gang of policymakers seemed to shift to a less dovish stance in their April monetary policy statement after holding on to an easing bias in their first two announcements this year.

During the presser, head honcho Poloz even explicitly stated that they are not looking to cut interest rates anytime soon. He did turn everyone’s attention to a potential housing market bubble in the country, cautioning that the rate of price gains might not be sustainable and adding more reason for policymakers to refrain from lowering rates further.

3. USD/CAD reaction

The Loonie’s reaction to the April BOC decision was generally bullish as the announcement and presser featured a slight shift from their previous bias.

USD/CAD 1-hour Forex Chart (April 12, 2017)
USD/CAD 1-hour Forex Chart (April 12, 2017)

As you can see from the chart above, the pair tends to consolidate leading up to the event as traders hold out from taking any large positions to minimize exposure. In this case, USD/CAD pulled up from its initial reaction then resumed moving in the same direction until the end of the U.S. session.

4. OPEC meeting could complicate matters

If you’ve been keeping tabs on commodity news, you’re probably aware that crude oil traders are biting their nails ahead of the official OPEC meeting on May 25. Market watchers have been buzzing about the likelihood of an output deal extension, something that could be bullish for crude oil and the positively-correlated Canadian dollar.

For the newbies out there, read up on why the Loonie tends to move in lockstep with crude oil prices and what’s going on with Black Crack these days.

Now this upcoming OPEC pow-wow is a big deal because many are hoping to see a nine-month extension of the current production deal. Some are even predicting that the oil mafia will adjust output levels of the member nations in order to make their joint effort to curb supply more effective. Either way, this event might limit the reaction to the BOC decision and spur quick profit-taking activity.

As I always say, there’s no shame in sitting on the sidelines if you’re not comfortable trading around big event risks or a likely spike in volatility. Just make sure you’re able to catch up on how the announcements turn out in order to make the necessary adjustments to your trades.