BoC is widely anticipated to cut its interest rate by 25bps to 4.50% today, the second reduction in a row. This expectation is strongly backed by financial markets, which are pricing in nearly a 93% probability. While the decision itself seems almost certain, the market’s attention will be on BoC’s guidance regarding the pace of future monetary easing.
A recent Reuters survey sheds light on the expected path of rate cuts. Out of 30 economists surveyed, 16 foresee two additional rate cuts this year, likely in October and December, which would bring the rate down to 4.00%. Ten economists predict just one more cut to 4.25%, while four expect a total of three additional cuts, taking the rate to 3.75%.
USD/CAD has been surging this week, driven in part by the broad selloff in commodity currencies, including Loonie. Additionally, there is backdrop of expectations that Fed will cut rates twice this year. Additionally, the potential return of Donald Trump to US presidency raises prospects of slower policy easing next year. In contrast, BoC is anticipated to ease policy more quick and deeper than Fed, while it has already commenced its cycle of rate cuts.
Technically, USD/CAD’s break of 1.3790 resistance solidify the case that consolidation from 1.3845 has completed with three waves down to 1.3588. Retest of 1.3845 high should be seen next. Firm break there will resume whole rally from 1.3176 and target 61.8% projection of 1.3176 to 1.3845 from 1.3588 at 1.4025.
