BoC rate decision is under the spotlight today. There is palpable readiness within the central bank to commence monetary policy easing especially following unexpectedly weak Q1 GDP data. The primary question being is whether it will take action today or defer until the next meeting in July.
Currently,most economists anticipate that conditions are now conducive for a 25bps rate cut to 4.75% at this meeting. Even if Governor Tiff Macklem opts to hold rates steady today, it is expected that he will signal an imminent rate cut.
Meanwhile, opting to wait until July would enable BoC to present a more comprehensive outline of its easing strategy, coinciding with the release of a new monetary policy report containing updated economic and inflation forecasts. This would provide a clearer framework for understanding the central bank’s expectations and strategic intentions moving forward.
Canadian Dollar is trading as the worst performer of the week at this point, partly dragged down by the extended fall in oil prices. As for USD/CAD, near term outlook stays bullish with 1.3589 cluster support intact (38.2% retracement of 1.3176 to 1.3845 at 1.3589). Break of 1.3742 resistance will be an early sign that rise from 1.3176 is ready to resume through 1.3845.
More importantly, that would put 1.3976 key resistance into focus. Firm break there will resume long term up trend from (1.2005). Next medium term target is 61.8% projection of 1.2401 to 1.3976 from 1.3176 at 1.4149.
