Source: Economic Events September 4, 2019 - Admiral Markets' Forex Calendar
Today's focus will clearly be on the BoC rate decision. In a more and more uncertain market environment, with several central banks around the globe already having cut rates and/or will likely ease further, such a step seems imminent for the Canadian central bank.
Based on a further escalation of the trade dispute between the US and China, and several signs pointing to a potential recession at the horizon of the world's biggest economy, a rate cut from the BoC wouldn't come as a big surprise – at least not at first glance.
Upon further investigation, it becomes clear that the BoC would have enormous difficulties to justify such a rate cut since the latest economic indicators (like the Canadian inflation which came in at 2% (YoY) against 1.7% expected) pointed to solid growth of the Canadian economy.
Thus, swap markets are currently pricing in a less than 20% chance of a BoC rate cut today. But on the other hand, markets see a more than 70% chance of a rate cut till the end of the year.
With that in mind, the main focus today will be on rhetoric from BoC Governor Poloz: any signs of aggressive easing respectively deep rate cuts based on any further escalation of the trade war between the US and China, could shoot the USD/CAD back above 1.3400 levelling the path up to 1.3500/50.
If we see a surprising turn towards neutral rhetoric, pointing to a 'wait-and-see'-approach, the Loonie could see a short-term squeeze leaving the currency pair with a chance to see another stint down to the region around 1.3200:
Source: Admiral Markets MT5 with MT5-SE Add-on USD/CAD Daily chart (between June 5, 2018, to September 3, 2019). Accessed: September 3, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the USD/CAD increased by 9.4%, in 2015, it increased by 19.1%, in 2016, it fell by 2.9%, in 2017, it fell by 6.4%, in 2018, it increased by 8.4%, meaning that after five years, it was up by 28.4%.
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