USD/CAD with a clear focus on the BoC rate decision on Wednesday
Today's focus will clearly be on the BoC rate decision. In a more and more uncertain market environment, with several central banks around the globe already having cut rates and/or will likely ease further, such a step seems imminent for the Canadian central bank.
Based on a further escalation of the trade dispute between the US and China, and several signs pointing to a potential recession at the horizon of the world's biggest economy, a rate cut from the BoC wouldn't come as a big surprise – at least not at first glance.
Upon further investigation, it becomes clear that the BoC would have enormous difficulties to justify such a rate cut since the latest economic indicators (like the Canadian inflation which came in at 2% (YoY) against 1.7% expected) pointed to solid growth of the Canadian economy.
Thus, swap markets are currently pricing in a less than 20% chance of a BoC rate cut today. But on the other hand, markets see a more than 70% chance of a rate cut till the end of the year.
With that in mind, the main focus today will be on rhetoric from BoC Governor Poloz: any signs of aggressive easing respectively deep rate cuts based on any further escalation of the trade war between the US and China, could shoot the USD/CAD back above 1.3400 levelling the path up to 1.3500/50.
If we see a surprising turn towards neutral rhetoric, pointing to a 'wait-and-see'-approach, the Loonie could see a short-term squeeze leaving the currency pair with a chance to see another stint down to the region around 1.3200.
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Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Based on a further escalation of the trade dispute between the US and China, and several signs pointing to a potential recession at the horizon of the world's biggest economy, a rate cut from the BoC wouldn't come as a big surprise – at least not at first glance.
Upon further investigation, it becomes clear that the BoC would have enormous difficulties to justify such a rate cut since the latest economic indicators (like the Canadian inflation which came in at 2% (YoY) against 1.7% expected) pointed to solid growth of the Canadian economy.
Thus, swap markets are currently pricing in a less than 20% chance of a BoC rate cut today. But on the other hand, markets see a more than 70% chance of a rate cut till the end of the year.
With that in mind, the main focus today will be on rhetoric from BoC Governor Poloz: any signs of aggressive easing respectively deep rate cuts based on any further escalation of the trade war between the US and China, could shoot the USD/CAD back above 1.3400 levelling the path up to 1.3500/50.
If we see a surprising turn towards neutral rhetoric, pointing to a 'wait-and-see'-approach, the Loonie could see a short-term squeeze leaving the currency pair with a chance to see another stint down to the region around 1.3200.
Ready to take your trading to the next level? Find out how in Admiral Markets’ new webinar series Trading Spotlight, where our trading experts will be discussing risk management, trading psychology, and their top strategies for trading the world’s most popular markets - admiralmarkets.com/e.../trading-spotlight-1
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
