USD/CAD recovers mildly ahead of 1.3016 today, as markets await BoC and FOMC rate decisions. BoC is widely expected to keep policy rate unchanged at 1.75%. Upside surprise in GDP growth and solid inflation offered BoC much room to stand on the sideline. Additionally, the newly-elected government’s fiscal stimulus is expected to support the economy in the coming year. There is no imminent need for the central bank to act in either direction. Ongoing trade war uncertainty and global economic slowdown would be the main focuses of policy makers ahead, and that could determine whether BoC needs to do anything next year.
On the other hand, markets are generally expecting Fed to cut interest rate again by -25bps to 1.50-1.75% today. Fed fund futures are pricing in 97.8% chance for that. The main question is whether chair Jerome Powell will signal that it’s the end of the so called “mid-cycle adjustment”. Such message could also be reflected in changes in the forward guidance too. There is prospect of a Dollar rebound should Fed affirm this message.
Here are some suggested readings on Fed and BoC:
- FOMC Preview – Third Rate Cut on Table. Will Fed Signal A Pause or More to Come?
- What To Watch When The Fed Meets This Week
- FOMC Preview: Rate Cut Priced In, But Powell May Move Markets Regardless
- October Flashlight for the FOMC Blackout Period
- Modern Monetary Theory: A Primer
- BOC Preview – Policy Rate will Stay Unchanged. But for How Long?
- The BOC and The Canadian Dollar
- USD/CAD Lower Ahead of BOC and FOMC Next Week
