When is the BoC rate decision and how could it affect USD/CAD?

BoC monetary policy decision - Overview

The Bank of Canada (BoC) is scheduled to announce its latest monetary policy decision at 1400 GMT this Wednesday. The central bank is expected to raise the policy rate, for the third time this year, by 25bps to 1.75% at the October meeting. 

Mario Blascak, FXStreet's own European Chief Analyst explains: "The line-up for the Bank of Canada hiking rates is almost perfect. The economy is in Bank’s own view operating near full capacity, the employment is rising and the headline inflation is well above the target. Moreover, the US Federal Reserve has already hiked rates in September, so now it is the time for the Bank of Canada to follow."

How could it affect USD/CAD?

With the rate hike nearly priced in the market, the subsequent press conference at 1515 GMT will play an important role in determining the next leg of a directional move for the Canadian Dollar. Ahead of the announcement, the USD/CAD pair was seen struggling to move back above the 1.3100 handle, albeit managed to hold above 100-day SMA. 

A hawkish rate hike might prompt some aggressive long unwinding trade and turn the pair vulnerable to extend its corrective slide from over five-week tops, set last Friday. The downfall is likely to accelerate the slide towards 1.3030 intermediate support en-route the key 1.30 psychological mark. 

Alternatively, any dovish signals might exert some fresh downward pressure on the Canadian Dollar and assist the pair to finally break through the 1.3125-30 immediate supply zone. The positive momentum could then lift the pair beyond the 1.3165-75 intermediate resistance towards reclaiming the 1.3200 round figure mark. 

Key Notes: 

   •  The Bank of Canada Preview: Canada set to follow US pattern and hike rates even with inflation decelerating

   •  BoC to hike, but CAD’s headwinds remain - Nomura

   •  USDCAD Forecast: Canadian dollar continues to drift, BoC expected to raise rates

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.