FX Week Ahead – Top 5 Events: September BOC Meeting & USD/CAD Rate Forecast
BANK OF CANADA (BOC) RATE REVIEW & USDCAD PRICE OUTLOOK:
- The Bank of Canada is set to provide currency traders with its updated monetary policy update next Wednesday
- USDCAD remains in focus as Canadian Dollar price action attempts to break away from major technical confluence
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With Canada’s Q2 GDP report in the rearview mirror, CAD currency traders will likely shift their attention to the upcoming September BOC meeting. The BOC will release its latest interest rate decision next Wednesday at 14:00 GMT with supplementary commentary on the central bank’s monetary policy outlook from Governor Poloz to follow shorty after.
SEPTEMBER BOC MEETING INTEREST RATE CHANGE PROBABILITIES
The Bank of Canada – one of the last standing central banks with a relatively hawkish stance – is widely expected to leave rates unchanged next week. In fact, there is a mere 6.7% probability that the September BOC meeting reveals a rate cut according to the latest overnight swaps pricing. Worth noting, however, is that the probability has dropped from 32.4% as recently as August 15.
CANADIAN DOLLAR IMPLIED VOLATILITY & TRADING RANGES
As one might expect, Canadian Dollar implied volatility measures have climbed with the September BOC meeting right around the corner. In fact, high-impact event risk surrounding the loonie has pushed 1-week implied volatility readings to multi-month highs and indicates currency option traders are expecting potentially sizable moves in the Canadian Dollar.
USDCAD PRICE CHART: DAILY TIME FRAME (MAY 20, 2019 TO AUGUST 30, 2019)
We recently highlighted that the Canadian Dollar looked ripe for a breakout, but conviction has since faded as outlook is clouded by the looming September BOC meeting. If the Bank of Canada reiterates its relatively hawkish position, however, that may be enough to tip the scales in favor of USDCAD bears. Conversely, the outstanding risk that the BOC and Governor Poloz follow in the footsteps of other central banks that have made a dovish shift in monetary policy this year could be confirmed, which stands to send the Canadian Dollar swooning.
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