BoC is widely anticipated to maintain benchmark overnight rate at 5.00% today, marking the fifth consecutive meeting without change. While dropping its tightening bias in January, it is deemed premature for BoC to adopt a loosening stance at this point. The central bank might reiterate the ongoing process to bring inflation back to target, indicating that the desired state has not been fully achieved yet. The critical aspect to observe will be how Governor Tiff Macklem articulates the current inflation outlook.
A recent Bloomberg survey highlighted consensus among economists predicting the first rate cut to occur in June. Overnight swaps markets attributing a mere 30% chance for a cut in April and anticipating the initial full 25 basis points reduction in July. Nonetheless, these projections remain flexible, hinging on forthcoming data and economic developments.
Canadian Dollar is trading as the month’s weakest performer so far, particularly struggling against Euro and Sterling. More downside is in favor for the Loonie in the near term as traders continue to reverse their bets on earlier ECB and BoE cut. The persistence of this selling momentum, however, ultimately depends on which central bank initiates rate cuts first and the subsequent rate of policy easing.
Technically, EUR/CAD’s breach of 1.4733 resistance suggests that correction from 1.5041 has already completed with three waves down to 1.4457. Further rally is now in favor as long as 55 D EMA (now at 1.4625) holds. Further rally would be seen to retest 1.5041 resistance first. Firm break there will resume the larger up trend to 61.8% projection of 1.4155 to 1.5041 from 1.4457 at 1.5343 next.
GBP/CAD’s breach of 1.7270 resistance this week suggests that consolidation from there has completed at 1.6919 already. Further rise is in favor as long as 55 D EMA (now at 1.7060) holds. Decisive break of 1.7332 high will resume the larger up trend from 1.4069 and target 100% projection of 1.6355 to 1.7270 from 1.6919 at 1.7834.
