When is the BoC monetary policy decision and how could it affect USD/CAD?

BoC monetary policy decision – Overview

The Bank of Canada (BoC) is scheduled to announce its latest monetary policy update at 15:00 GMT this Wednesday. The BoC is widely anticipated to maintain status-quo and leave its benchmark interest rates unchanged at 0.25% at the conclusion of the December policy meeting. Hence, the key focus will be on the accompanying statement, where market expectations will be looking for any kind of a shift in the monetary policy outlook.

As FXStreet's own analyst, Yohay Elam, explains: “There are good reasons for the BOC to convey an upbeat message about the economy moving forward rather than focusing on the negatives in the present.”

How could it affect USD/CAD?

Ahead of the key event risk, the USD/CAD pair was trading just below the 1.2800 mark, well within the striking distance of the lowest level since May 2018 touched earlier this week. A more cautious approach should be enough to trigger a near-term short-covering move. The uptick, however, is more likely to meet with some fresh supply at higher levels amid the prevalent bearish sentiment surrounding the US dollar.

Conversely, an optimistic projection should pave the way for an extension of the pair's well-established bearish trend. All in all, the path of least resistance remains on the downside and the pair seems more likely to weaken below the recent lows and slide further to the 1.2730-25 support zone. That said, oversold conditions might hold traders from placing aggressive bearish bets and extend some support.

Key Notes

  •  Bank of Canada Preview: Why the BOC could send CAD higher, despite downbeat data

  •  Canadian dollar wavers ahead of the BOC interest rate decision

  •  Will USD/CAD fall to fresh 2.5 yr lows on Bank of Canada announcement?

About the BoC interest rate decision

BoC Interest Rate Decision is announced by the Bank of Canada. If the BoC is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the CAD. Likewise, if the BoC has a dovish view on the Canadian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.