Rate decision from Bank of Canada at 3:00 pm BST today is a key macro event of the day. The Canadian central bank is expected to deliver a 75 basis point rate hike that would put the main interest rate at 4% - the highest level since February 2008. However, economists polled by Bloomberg are far from being unanimous as twelve expected a 50 bp rate move and sixteen expect a 75 bp rate move. Money market prices-in 69 bp of tightening currently.
BoC Governor Macklem signaled many times that the Bank's intent is to continue raising rates until signs of inflation cooling emerge. Canadian CPI inflation currently sits at 6.9% currently. However, there are limits to how high the rates can go - Canadian households have relatively high levels of indebtedness so hiking rates too high may put a massive strain on them and lead to public outcry. Apart from that, some media report that Fed may be set to slow its policy tightening and, given that BoC often follows in Fed's footsteps, this could lead to a less hawkish stance from BoC. Having said that, investors will look for any dovish hints from BoC Governor Macklem during a press conference at 4:00 pm BST today.
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Open account Try demo Download mobile app Download mobile appTaking a look at USDCAD chart at H1 interval, we can see that the pair has been trading sideways since late-September. However, the pair also looks to be moving in a downward channel since mid-October. USDCAD broke below the 1.3600 support zone this morning and the downward move continued. A break below a short-term swing level at 1.3570 can be observed at press time. Should the downward move accelerate further, sellers' attention may turn to the next major support in line - a 1.3500 price zone. However, a break below the lower limit of the downward channel would be needed first.
Source: xStation5
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