- The Bank of Canada is anticipated to hold interest rates steady.
- Canada’s GDP increased by 0.3% month over month in February.
- Money markets expect the BOC’s next policy move after Wednesday will be a rate cut.
Today’s USD/CAD forecast is slightly bearish. At its meeting on Wednesday, the Bank of Canada is anticipated to ignore the recent economic strength and hold interest rates steady, betting on a slowdown in activity as higher rates take effect.
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After raising its benchmark rate to a 15-year high of 4.50% last month, the Bank of Canada made history by becoming the first significant central bank in the world to halt its rate-hiking campaign. It declared that no additional tightening would be required if the economy slowed or even entered a minor recession as expected.
Although recent months have seen a decline in inflation, other economic indicators indicate that the economy is recovering from a weak fourth quarter.
According to preliminary figures released last week, the gross domestic product (GDP) increased by 0.3% month over month in February. This followed a stronger-than-anticipated 0.5% increase in January. Data on employment for March indicated a seventh straight month of job growth.
This is mostly good news, but Bank of Canada (BoC) Governor Tiff Macklem is unhappy. This is because it might put into doubt his decision to declare a conditional rate halt in January.
When the BoC announces its next policy decision on Wednesday, all 33 economists surveyed by Reuters expect it to maintain its benchmark overnight rate.
Money markets expect the central bank’s next policy move will be a rate cut.
USD/CAD key events today
There won’t be any news releases from Canada or the US today. Therefore, the price will likely consolidate.
USD/CAD technical forecast: Bulls struggling around 30-SMA
The 4-hour chart shows USD/CAD trading slightly above the 30-SMA with the RSI near the 50-line, showing a bullish move. The price broke above the 1.3500 key level, but the bullish move is weak. The price has been unable to move far above the SMA.
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If bulls get stronger, the price will likely rise to the 1.3601 resistance level. However, if bulls do not get stronger, we might see bears come in to push the price back below the 1.3500 key level and toward the 1.3400 support.
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Saqib Iqbal
