Market news

25 January 2023

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 monetary policy decision this Wednesday at 15:00 GMT. The Canadian central bank is widely expected to lift its benchmark rate by 25 bps to 4.50% at the end of the January meeting. The markets, however, are also pricing in a small chance of the BoC leaving rates unchanged amid looming recession risks. Hence, the focus will also be on the accompanying policy statement and the post-meeting press conference, which will be looked upon for fresh cues about the future rate-hike path.

According to Dhwani Mehta, Senior Analyst and Asian Session Manager at FXStreet: “a pause in the BoC’s rate hike track could support the economy, especially after the Business Outlook Survey released by the central bank showed last week that more than 70% of Canadian consumers and two-thirds of business firms think a recession is likely in the next 12 months.”

Analysts at ING also offer a brief preview of the upcoming central bank event risk and write: “The BoC is getting close to the end point of its interest rate hiking phase. Inflation is showing signs of coming off, but the jobs market remains hot and as such we expect a final 25 bps interest rate hike. The BoC will likely characterise this as a pause, but we expect it to mark the peak as global recessionary forces are increasingly felt within Canada and inflation numbers continue to subside.”

How Could it Affect USD/CAD?

The BoC is unlikely to hint towards a more aggressive tightening and a dovish signal will be enough to exert heavy downward pressure on the Canadian Dollar. This, along with the emergence of some US Dollar buying, supports prospects for some upside for the USD/CAD pair. That said, the recent bullish run in crude oil prices might continue to underpin the commodity-linked Loonie and cap any meaningful gains for the major, at least for the time being.

Furthermore, traders might also refrain from placing fresh directional bets around the USD/CAD pair and move to the sidelines ahead of the crucial FOMC monetary policy meeting next week. Hence, any immediate market reaction is more likely to remain muted and fade rather quickly.

Key Notes

 •  Bank of Canada Preview: The final one, with a pause ahead?

 •  BoC Preview: Forecasts from eight major banks, edging towards a final rate hike

 •  USD/CAD Forecast: Bias seems tilted in favour of bearish traders, BoC decision awaited

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.

Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.94% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2023 Teletrade-DJ International Consulting Ltd

This website is operated by Teletrade-DJ International Consulting Ltd, which is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11. Teletrade-DJ International Consulting Ltd is located at 88, Arch. Makarios Avenue, 2nd floor, Nicosia Cyprus.

The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies.

Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.94% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Choose your language/location