Home Daily Commentaries Markets focus on Bank of Canada rate decision tomorrow

Markets focus on Bank of Canada rate decision tomorrow

Daily Currency Update

The Bank of Canada (BoC) will make their next interest rate announcement tomorrow. The market is currently anticipating a pause in hikes for this meeting. This is also supported by the fact that the Reserve Bank of Australia (RBA) held rates at their policy meeting last night. The USD/CAD pair currently sits at 1.3631 with Canada’s rate decision tomorrow giving the possibility to send the pair up even higher if the BoC holds rates steady.

Key Movers

he US dollar index (DXY) inches closer to 105 as US data comes in higher than expected. July factory orders were released at -2.1% versus the -2.5% expected. While slightly better than expected, this movement is still not extremely significant. Weak data out of China and Australia has pushed the dollar index up today to levels not seen since March of this year.

The Reserve Bank of Australia (RBA) left interest rates unchanged at 4.1%, within market expectations. There are still some forecasts for rate hikes in the future as mentioned by RBA Governor Phillip Lowe, “…some further tightening of monetary policy may be required.” The AUD is down against most major currencies currently.

European Central Bank (ECB) President, Christine Lagarde’s speech kept market participants in suspense regarding next week’s rate decision with the following comment, “…actions speak louder than words.” Money markets are currently pinning odds around 25% for a quarter-point rate hike.

China’s Services Purchasing Manager’s Index (PMI) dropped to 51.8 in August from 54.1 in July, this is the lowest reading since December, when the country was under lockdown with COVID-19.

Expected Ranges

  • EUR/CAD: 1.46017 - 1.47022 ▼
  • GBP/CAD: 1.70978 - 1.71925 ▼
  • AUD/CAD: 0.86716 - 0.87869 ▼
  • USD/CAD: 1.35863 - 1.36694 ▲