Bank of Canada Stayed on the Sidelines for Second Straight Meeting
BoC on Hold
The Bank of Canada kept rates unchanged at 5% for second consecutive meeting on Wednesday, helped by the moderation in the latest inflation data, as CPI eased to 3.8% y/y in September. The central bank has delivered 475 basis points worth of hikes since the March 2022 lift-off and policymakers see "growing evidence" that their past actions are "dampening economic activity and relieving price pressures".
The accompanying statement was generally a bit more dovish compared to the previous decision, but raised the CPI projection to 3.9% for 2023, from 3.7% previously. Officials are "concerned' that progress towards price stability is "slow" and noted that "inflationary risks have increased", reiterating their readiness to tighten policy further if necessary.
USD/CAD Analysis
USD/CAD runs its third straight profitable month, as the greenback has benefited from the Fed's hawkish bias and rising treasury yields. The pair extended its gains in the immediate aftermath of the BoC decision, eyeing the 2023 highs (1.3863), but further gains will likely need fresh impetus.
On the other hand, recent dovish Fed speakers have undermined the higher-for-longer mantra, while their Canadian peers kept more hikes on the table today. Furthermore, the RSI moves to overbought territory, which can contain the upside and create pressures back towards the EMA200 (1.3620). Daily closes below it would pause the bullish bias, but strong catalyst would be needed for that and the downside appears well protected.
Key releases are due this week that can determine the next leg of the move, highlighted by the US PCE inflation update.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.