How Dovish will the Bank of Canada be?

How Dovish will the Bank of Canada be?

Points to consider with this Forex article:

• The Bank of Canada (BOC) will be releasing its rate decision later today and there little expectation for them to make a move on rates.
• Investors should watch the updated forecasts. The economy in Canada has faced some headwinds as the USD/CAD Forex market has been rather strong. The Loonie rose as oil prices rose in 2016. How dovish will the BOC be today in its remarks.

Over the next couple of days, financial traders, including those in the Forex world, will see some market moving events. First up is the rate decision by the Bank of Canada. The BOC is not expected to make any change to monetary policy or any moves with the interest rates. What will be quite relevant will be the banks’ position with forward guidance as well as the updated forecasts for the Canadian economy.

The Canadian economy has been on a rollercoaster much of 2016. Coming into January, the Canadian Dollar was very weak. Then we began to see inflation on imported products such as Canadian Cauliflower. This crisis came up earlier in the year. After the election of Justin Trudeau as prime minister, he built a platform around economic stimulus. Their central bank, the Bank of Canada, took a back seat towards monetary stimulus to allow Trudeau fiscal plans to work. With the BOC taking a step back and allowing Trudeau’s policies to work, the Canadian Dollar rose some 2,000 pips in a mere three months. This was in the first quarter of 2016, from January to April.

However, the renewed strength in the Canadian Dollar was not all good. Oil prices recovered a bit, for most of this period which added more strength to the Loonie. This offset a lot of benefits from a strengthening local currency from the rise in energy prices. Exports have been horrible all year for Canada. The new question is, how much longer the BOC can wait for Trudeau’s policies to work before stepping in. So today’s forecasts will be key. Please see the below USD/CAD Forex chart.

[Chart]

In other words, today’s price action with this Forex market will be dominated by how dovish the Bank of Canada is with their post policy statement and forecasts. Should the central bank convey a message of continued economic weakness, the we will see the Loonie weaken as traders will be eying additional monetary stimulus in the short future.

 

 

from Bullish University http://ift.tt/2evTZa3