The Bank of Canada (BoC) will have a monetary policy decision today at 14:00 GMT, the first lead by new Governor Tiff Macklem. BoC’s likely to maintain its current monetary policy unchanged in July. USD/CAD is unlikely to leave its monthly boundaries though an upbeat stance could send the loonie below 1.36, FXStreet’s Chief Analyst Valeria Bednarik briefs.
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Key quotes
“Policymakers are expected to maintain the main rate at 0.25%, the level set last March when the ongoing coronavirus pandemic forced them into three rate cuts within a month. Speculative interest will be looking for any change in the bond-buying program, although chances of that happening are quite a few. Meanwhile, negative rates in Canada are off the table for now, as well as a rate hike, given the high levels of uncertainty surrounding how the economic recovery will unfold.”
“Back in April, the BoC launched the Government of Canada Bond Purchase Program (GBPP), a program to purchase Government of Canada securities in the secondary market, which targets a minimum of $5 billion per week across the yield curve. No changes are expected in the GBPP either this month, as long-term bond yields remain at historical lows, in line with the BOC’s target.”
“A horizontal 200-DMA around 1.3490 has provided support, while sellers have been strong around the current 1.3630 price zone. The top of the monthly range comes at 1.3715. It seems unlikely that the BoC can trigger a movement strong enough to push the pair outside the mentioned boundaries.”
“An optimistic stance could see it pulling down to 1.3600, while below this last, an approach to the mentioned 1.3490 level seems likely, particularly considering the market is quick when it comes to selling the greenback. A test of the 1.37 area is possible only if risk aversion returns alongside dovish Canadian policymakers.”
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