USDCAD will provide volatility for traders with a BOC interest rate meeting, FOMC minutes and US inflation ahead.
USDCAD – Daily Chart
USDCAD has been lower for two days with a move to 1.3463. That takes the pair below a support trend line and could open the door to further losses for the US dollar.
The Bank of Canada is expected to hold rates steady for a second meeting at 4.5%. Still, analysts see the central bank in a tricky position. Karl Schamotta, the chief market strategist at Corpay, said on Bloomberg that the Bank of Canada will acknowledge downside economic risks from the US banking sector.
“I don’t think anyone on Wall Street is expecting a hike or really any adjustment here. We are expecting a hold but also a relatively hawkish bias in the accompanying statement,” Schamotta said.
BOC Monetary Policy vs US Inflation Data
“The Bank of Canada is, unfortunately to a very large degree, sort of pinned between a rock and a hard place at this point. They can’t respond to the data by cutting rates, but at the same time, they can’t continue hiking because they are aware that there are huge downside risks ahead for the Canadian economy,” he added.
For the US economy, traders will see the release of the latest FOMC monetary policy minutes, which will be released after the latest inflation numbers. After Wednesday, investors will know how to price the path ahead for USD/CAD.
The headline inflation rate in the US is expected to drop to 5.2% from 6%, which is getting closer to the Fed’s 2% target. However, the recent spike in oil prices may cause the central bank to be cautious. In a recent analyst note, BlackRock said they do not see a high chance of a rate cut soon.
Traders should see volatility from the latest data, and the USDCAD is currently in a bearish posture.
