Canadian dollar flat ahead of BOC meeting

The Canadian dollar is trading quietly on Wednesday. In the North American session, USD/CAD is trading at 1.3580, down 0.08%

On the economic calendar, the Bank of Canada holds its rate meeting. The US will release JOLTS Job Openings, which is expected to tick lower to 8.9 million in February, compared to 9.02 million a month earlier.

Bank of Canada likely to stand pat again

There isn’t much excitement ahead of today’s rate announcement from the Bank of Canada. The BOC is widely expected to hold the current cash at 5% for a fifth straight time.

BOC policy makers face a significant challenge as they chart a rate path. Canada’s economy is relatively weak, but fears of a recession have largely receded, in no small measure due to the US economy’s surprisingly strong performance. Inflation slowed to 2.9% in January, mostly due to a sharp drop in gasoline prices. This is still well above the BOC’s inflation target of 2%.

The markets are looking for a rate cut in the summer but the BOC has good reason to remain cautious before it starts to lower rates. Wage growth remains high and core inflation, which is a better indicator of inflation trends than the headline rate, is above 3%. The central bank doesn’t want to add to the misery of home owners and raise rates, but a rate cut is premature with inflation still high. This means that the BOC will likely stay on the sidelines today and wait for key economic releases before deciding on its next move.

In the US, Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee later today. Powell is expected to reiterate that inflation is moving lower but needs to come down further before the Fed will feel comfortable in lowering rates.

USD/CAD Technical

• USD/CAD remains range-bound. There is resistance at 1.3616 and 1.3671
• 1.3550 and 1.3495 are providing support