The Bank of Canada will announce or constrict decision at 9:45 AM.
- BoC expected to hold rates at 2.25%, maintaining a cautious, “wait-and-see” stance
- Policy balance: Weak growth and labor market vs. inflation risks from higher energy prices (US–Iran conflict)
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Inflation backdrop:
- Headline CPI rose to 2.4% (energy-driven)
- Core (Trimmed-Mean) eased to 2.2% (near target)
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Growth outlook:
- Sluggish economy + weak jobs data lean toward easing
- But risk of second-round inflation keeps BoC sidelined
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New forecasts expected:
- Higher inflation projections
- Lower growth outlook
- Key concern: Whether energy-driven inflation spills into wages and expectations
- Additional risk: Uncertainty around CUSMA renegotiations
- Market expectations: Pricing in a rate hike in Q4 2026
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What to watch:
- Any shift in tone toward earlier tightening
- Or pushback against market pricing
Bottom line: Likely no change and limited volatility, with emphasis on data dependency
Ahead of the rate decision, USDCAD is trading marginally lower, holding within a tight ~21 pip range. Zooming out, the pair has been locked in a broader ~120 pip range over the past nine trading days, with back-and-forth volatility keeping directional conviction limited.
That consolidation has pulled the 100- and 200-hour moving averages together at 1.3666, creating a clear barometer for buyers and sellers. Staying above keeps the bias tilted higher, while a move below would shift the near-term bias back to the downside.
On the topside, the 61.8% retracement of the move from the March low at 1.3693 remains a key resistance level. The price tested and stalled against it earlier today. A break above that level, along with a push through last Friday’s high, would open the door for a run toward the 100-day moving average at 1.3731. Notably, the pair has remained below that 100-day MA since the break lower on April 15, keeping the broader bias in check.
On the downside, a move below the 1.3666 MA cluster would target the next swing area between 1.3620 and 1.3630
