– Bank of Canada (BoC) to Keep Benchmark Interest Rate at 0.50%.

– Will Governor Stephen Poloz and Co. Trim Their Economic Forecasts?

Trading the News: Bank of Canada Interest Rate Decision

The Canadian dollar may show a limited reaction to the Bank of Canada’s (BoC) October interest rate decision as Governor Stephen Poloz and Co. are expected to retain the current policy, but the near-term decline in USD/CAD may largely unravel should the monetary policy report fuel bets for more easing.

What’s Expected:

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Why Is This Event Important:

The BoC may show a greater willingness to implement lower borrowing-costs as the ‘risks to the profile for inflation have tilted somewhat to the downside since July,’ and a reduction in the central bank’s economic projections may drag on the local currency as market participants boosts bets for additional monetary support. However, Governor Poloz and Co. may continue to advocate a wait-and-see approach as the central bank anticipates a ‘substantial rebound’ in the second-half of 2016, and the fresh comments may boost the appeal of the Canadian dollar should the committee sound upbeat this time around.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Housing Starts (SEP)

190.0K

220.6K

Ivey Purchasing Manager Index s.a. (SEP)

53.1

58.4

Net Change in Employment (SEP)

7.5K

67.2K

The ongoing expansion in the housing market accompanied by the sharp pickup in employment may push the BoC to raise its fundamental assessment of the real economy, and the Canadian dollar may face a bullish reaction should Governor Poloz talk down bets for a rate-cut.

Risk: Bearish Argument/Scenario

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