BOC Up Next
The Bankof Canada is the next G10 central bank to take centre stage. The BOC will meetlater today for its March rates decision and the market is broadly expectingthe bank to deliver a further increase. Traders are anticipating a further .25%rate hike from the bank in line with the sort of pattern seen during priortightening cycles whereby the bank begins with smaller .25% increases beforelooking scale up later in the cycle.
CAD Supported By Oil Flows
TheCanadian Dollar has been well supported ahead of the meeting, due largely tothe ongoing strength in oil prices. Crude has seen strong demand in response tosupply concerns around the Russian – Ukrainian war. Crude prices are now tradingfirmly above $100 per barrel, having risen sharply in recent days and withlittle sign of slowing down near term. Given the upside pressure that risingoil prices are exerting on inflation, both domestic and global, the BOC is likelyto highlight the need for continues rate hikes this year in order to stop inflationfrom spiralling out of control.
How Will Ukraine Factor?
Aswe saw with the RBA this week, the BOC is likely to address the Russianinvasion of Ukraine, particularly given its impact on oil. With this in mind, traderswill be keen to see how the BOC judges the risks stemming from the conflict. Giventhat oil prices might continue higher in coming months, the conflict mighttranslate into upside risks for the BOC, creating the need for additionaltightening.
QE Strategy In Focus
Traderswill also be watching to see whether the BOC announced an end to its QEreinvestment policy or if it holds on until the next meeting. If it isannounced today, this will be firmly bullish for CAD, taken as a strong hawkishsignal. If the decision is postponed, this might be met with a little disappointment.However, this aspect of the meeting will likely be overshadowed by the bank’sbroader outlook and forward guidance.
TechnicalViews
USDCAD
Thepair remains gridlocked for now as USD remains well supported on safe-havenflows and CAD remains well supported on oil flows. Price is currently sittingin a tight range between 1.2648-1.2814 within the middle of the bull channel withindicators flat. While the channel holds, focus is on an eventual break higherwith 1.2962 the next level to watch ahead of 1.3145. To the downside, the bullchannel low and the 1.2469 level are the key supports to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.