BoC is widely expected to cut interest rates for the third consecutive meeting today, lowering the policy rate by 25bps to 4.25%. With inflation at a 40-month low of 2.5% and trending toward the 2% target, coupled with ongoing weakness in the labor market, further easing is anticipated. As a result, BoC is likely to maintain a dovish stance in its statement.
A recent Reuters poll shows that 70% of economists expect additional rate cuts in October and December, with the rate reaching 3.75% by year-end. Seven economists predict the rate will be 4.00%, while only one expects a drop to 3.50%.
CAD/JPY saw a notable decline after briefly rising to 109.03 earlier this week. A couple of factors could be in force today. BoC’s decision and statement, overall risk sentiment, and the risks for further declines in oil prices could all impact the pair’s next move.
Technically, rebound from 101.63 is still in favor to continue as long as 106.21 support holds. Above 109.03 will target 61.8% retracement of 118.85 to 101.63 at 112.27. However, firm break of 106.21 will argue that the rebound has completed and bring deeper fall back to retest 101.63 low.
