BOC Up Next
The Bank of Canada meets today for Its September monetary policy review and the event is drawing plenty of attention. Along with the RBNZ, the BOC has been among the most hawkish of the G10 central banks having tapered twice already this year. The big question for the market now is whether the BOC will announce further tapering today, or look to pause its tightening operation ahead of the federal elections there on September 20th.
Hesitancy Creeping In?
With the RBNZ having recently avoided hiking rates and the RBA’s “dovish taper” this week, there has certainly been a shift towards caution among the hawkish G10 central banks. The global rise in Delta cases has raised fresh challenges for governments as the rate of infection and hospitalisation among even the double vaccinated creeps higher. Recent data reflects the impact of the latest outbreak with some key indicators softening over recent months as a result of the disruption caused by the pandemic. In line from what we’ve heard from other central banks, the uncertainty this creates within the outlook is likely to be strong enough to see the BOC hitting pause for now.
Political Uncertainty
Aside from the uncertainty around the pandemic, there is also uncertainty on the political front. With the September 20th elections fast approaching, Canadian PM Justin Trudeau’s party has seen a sharp drop in support, as highlighted by opinion polls. Following the August announcement of snap elections, it seems that Trudeau’s plan of attempting to secure a majority in the house has backfired, raising political risks in the near term.
Guidance Is Key
Given the weaker date of late, the rising COVID cases and fresh fears around Delta, the political uncertainty ahead of the elections, it seems likely that the BOC will stay on hold now. In terms of guidance, the bank is likely to reiterate its message that it intends to continue tapering assets with the goal of raising rates as early as late 2022, acknowledging the improvements in the economy (domestic and global) while still respecting the downside risks in its outlook.
Technical Views
USDCAD
The recent breakdown in USDCAD saw price breaking below the rising trend line. However, the decline ran into buying interest as it approached the 1.2469 level and has now reversed, breaking back above the trend line and the 1.2648 level. With indicators turning higher here there is room for the move to continue towards the 1.2814 level if CAD weakens further today.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.