USD/CAD Canadian Dollar Flat Awaiting BOC Rate Decision

The Bank of Canada is expected to keep rates on hold

The Canadian dollar is slightly up versus the USD as the pair continues on a tight trading range ahead of the release of the interest rate statement by the Bank of Canada (BoC) on Wednesday, October 19 at 10:00 am EDT.

The Bank of Canada (BoC) is not expected to change rates from 0.50 percent on Wednesday as the central bank is yet to report on the effects on the government’s stimulus package. The loonie has depreciated this year which should have given Canadian exports a lift but so far that has not been enough to offset the losses from natural resource exports.

Canadian retail sales and inflation data will be released on Friday, October 21. The Federal government has made an effort to cool down the housing market with measures that will kick into effect on October 17, but its too early to tell if they will accomplish the goal of moderating real estate prices in Vancouver and Toronto.

The USD/CAD is 0.039 percent lower on Tuesday. The currency pair is trading at 1.3122 ahead of the Bank of Canada (BoC) rate statement tomorrow. The loonie has been appreciating agains the USD thanks to the stability in oil prices in the last week.

The Canadian currency is subject to the tone of the rhetoric from the Canadian central bank as it delivers its rate statement on Wednesday. There is little chance of a rate cut this week, but the BoC has turned more dovish as the fiscal stimulus from the Federal government has not had the expected positive impact and more will be needed. The central bank was proactive in 2015 with two rate cuts to leave the current benchmark interest rate at 0.50 percent but with limited runway and an impending U.S. rate hike the best strategy could be to stand pat.

West Texas climbed 0.732 percent in the last 24 hours. Trading has been subdued on the usually volatile oil price as anxiety about the supply of crude is being offset by the optimism within the Organization of the Petroleum Exporting Countries (OPEC) about an upcoming agreement in November. U.S. crude oil inventories to be released tomorrow will once again spur a supply glut if the figure is close to the forecasted 2.2 million barrel buildup.

The U.S. crude inventories data will be sandwiched between the release of the Canadian benchmark rate statement and the speech by Governor Stephen Poloz that starts at 11:15 am EDT. The BoC governor will have a busy day as he will feature again later in the day when he testifies before the Senate Standing Committee on Banking, Trade, and Commerce at 4:15 pm EDT.

Market events to watch this week:

Wednesday, October 19
4:30am GBP Average Earnings Index 3m/y
4:30am GBP Claimant Count Change
8:30am USD Building Permits
10:00am CAD BOC Monetary Policy Report
10:00am CAD BOC Rate Statement

11:15am CAD BOC Press Conference
8:30pm AUD Employment Change
Thursday, October 20
4:30am GBP Retail Sales m/m
7:45am EUR Minimum Bid Rate”/>

8:30am USD Philly Fed Manufacturing Index
8:30am USD Unemployment Claims
Friday, October 21
8:30am CAD Core CPI m/m
8:30am CAD Core Retail Sales m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza