BOC In Focus Today
The main event focus today will be the Bank of Canada’s September rates meeting. The BOC has been among the more hawkish of the G10 central banks, having been the first to hike rates in the post-pandemic tightening cycle and the first to hike rates by a full 1%. Consequently, the expectation is also that the BOC will be the first to suspend its tightening operations, which brings us to today’s meeting.
There has been a lot of speculation about whether the BOC will use today’s meeting to effectively pause its tightening cycle for now. In terms of the hike itself, .5% hike is priced in, while many platers are looking for a larger .75% but none are expecting a follow-up to the 1% hike seen last time around. Even at .5%, that would take Canadian rates up to 3%, the highest in the G10 block.
Guidance Key
However, the bigger focus at this meeting won’t be on the size of the rate hike but on the guidance given. If the bank confirms it will pause on more tightening for now, or signals a likelihood of doing so before year-end, this is likely to send CAD lower near-term as traders look to other central banks playing catch up to trade a narrowing interest rate differential. On the other hand, if the BOC focuses on still-high inflation and the need to keep going with tightening, this should see CAD supported on the back of the meeting.
Where to Trade the BOC Today?
EURCAD
With hawkish ECB expectations ahead of tomorrow’s meeting, EURCAD is a great choice for a CAD short if we see CAD weaken on today’s meeting. The pair has been trading lower within a broad bullish channel this year. However, recently price action has flattened out a little and we’ve seen strong bullish divergence on momentum studies suggesting the pair might be basing here. Bulls can look to trade a break of the 1.3198 highs, targeting a move through 1.3384 up to 1.3766 longer term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.