When is the BoC monetary policy decision and how could it affect USD/CAD?

BoC monetary policy decision - Overview

The Bank of Canada (BoC) is scheduled to announce its latest monetary policy update at 14:00 GMT this Wednesday and is widely expected to leave benchmark interest rates unchanged at 1.75% at the conclusion of its September policy meeting. Hence, the key focus will be on the tone in the accompanying policy statement and the post-meeting press conference, wherein even small changes could trigger some volatility and provide some meaningful impetus to the Canadian Dollar.
 
According to Yohay Elam - FXStreet's own analyst - “A dovish message – especially due to high uncertainty rather than the current state of the economy – is the most likely scenario and could weigh on the loonie. Another scenario is a balanced sentiment that would keep USD/CAD stable, while the loonie may rise in the unlikely case of an optimistic outcome.”

How could it affect USD/CAD?

Ahead of the key event risk, the USD/CAD pair was seen retreating farther from 2-1/2 month tops set in the previous session, albeit has still managed to hold its neck above the 1.3300 round figure mark. Any hawkish signal - though seems unlikely - might provide a strong boost to the Canadian Dollar and continue fueling the pair's ongoing long-unwinding trade. The pair then could slide further towards mid-1.3200s before eventually dropping to the 1.3225 intermediate support ahead of the 1.3200 handle.
 
Alternatively, should the BoC strike a more cautious tone, the pair is likely to build on its recent positive momentum and aim towards the 1.3400 handle en-route its next major hurdle near the 1.3425-30 region.

Key Notes

   •   BOC Preview: Seeing the glass half empty may restart the USD/CAD rally – three scenarios
 
   •   BoC: How CAD will be impacted by the decision?
 
   •   USD/CAD retreats farther from 2-1/2 month tops, focus remains on BoC

About the BoC interest rate decision

BoC Interest Rate Decision is announced by the Bank of Canada. If the BoC is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the CAD. Likewise, if the BoC has a dovish view on the Canadian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.