The Bank of Canada will announce their rate decision tomorrow at 10 AM ET, with expectations of a 25 basis point hike to 5.0%. It would be the 2nd consecutive meeting where the bank raised the rates by 25 basis points. The hikes come after 3 months when the bank had a “conditional pause”.
Focus will be on how the BOC sees rates going forward. Growth in Canada for the 1st quarter was at 3.1% and it is tracking close to 2% in the 2nd quarter (but expected to move lower in the 2H). Inflation declined to an annual rate of 3.4% as a result of base effects. The bank does not see inflation return it to 2% target until 2025. Like in the US core inflation remains sticky.
The Bank of Canada will update its growth/inflation projections. Analysts expect:
- 2023 CPI to rise to 3.7% from 3.5%
- 2024 CPI is expected to remain unchanged at 2.3%
For GDP:
- 2023 GDP expected at 1.3% versus 1.4% last
- 2024 CPI expected at 1.0% versus 1.3% last
Technically, the price is below a swing area between 1.3271 and 1.32853. Stay below 1.32853 keeps the bias shift more to the downside. On the downside, the 100-bar moving average on the 4-hour chart comes at 1.32349 and is the next target to get to and through. The low price for the day reached 1.3244.
USDCAD between 100 and 200 bar MA on 4-hour chart