The Bank of Canada is scheduled to update its monetary policy stance after its meeting on Wednesday. There is debate about whether the BOC will hike 25 or 50 basis points from its current 3.75% rate. Still, Canadian dollar traders will likely draw on the comment. Currently, Canada’s benchmark rate stands at 3.75%, which is near the top of the field of the majors, just behind the Reserve Bank of New Zealand’s and the Federal Reserve’s key rates. Whether the Bank of Canada decides to hike 50 basis points, it could raise rates to match the current US or New Zealand rates, respectively.
Investors who focus more on the significant throttle back on its rhetoric for monetary policy intentions going into 2023 will likely find the alternative of ambiguous hawkishness struggling quickly. That is because there is a similar tenor to the Fed’s outlook, and anticipation will soon shift over for the Fed’s decision next week, affecting the CAD’s further upward path.
USDCAD – Day Chart
The US dollar has risen against the Canadian dollar (USDCAD) for four consecutive days, hitting the highest level since early November. The Bank of Canada will discuss interest rates tonight. The market has different expectations for the specific rate hike. Pay attention to whether the Bank of Canada will mention the possibility of a pause button on the interest rate hike early next year. If it happens, the Canadian dollar must be increased downward.
