Ahead of the Bank of Canada decision later today, our tracker for the Canadian economy shows some improvement in various sectors including the health of consumer, labour market, inflation, housing markets and the manufacturing sector. Most of the figures came in with a surprise pick up, particularly the labour market. Moreover, core inflation advanced to 1.7% in its latest reading.

 

 

As a result, the Bank of Canada is unlikely to move in today’s meeting. The bank is likely to maintain the current overnight rate unchanged at 0.5%. However, a dovish tone is more likely. The bank is may decide to keep the door open for further measures but the possibility for any rate hike at least until Q4 of this year is unlikely.

 

 

USDCAD is heavily oversold on most timeframes, as the Crude Oil recovery continues ahead of the Doha Meeting on Sunday. Today’s BoC decision may be the key to finding a bottom in USDCAD. A dovish tone could keep the pair above 1.27 for the time being. Moreover, with USDX appearing heavily oversold, USDCAD could bounce back to retest 1.30 in the coming days.