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Does the BOC Have a Surprise for CAD Traders?

May 23, 2019
BY Emma Richards

The Bank of Canada (BOC) is playing a very safe game as its May 29 interest rate announcement draws close. The last BOC analysis gave no indication of a future increase, which means the 1.75% rate is expected for the fourth time in a row. A rise in crude oil prices and weak export figures could be to blame for this stagnation, but why is further slowing expected as Q3 approaches?

The BOC’s last GDP growth announcement was a very conservative 1.2%—down from 1.7% in January. Optimistic analysts are stubbornly ignoring the lackluster, expecting the Canadian economy to gain momentum in Q3, forecasting 2%+ by 2020, but that outlook is not supported by the current sideways trend seen on the charts. The BOC is staying noncommittal for now with general statements that are not offering traders any inclination of what to expect.

“We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive.”

Governor of the Bank of Canada. Stephen S. Poloz

This BOC statement aptly reflects the noncommittal stance that Canada is taking, leaving CAD traders uncertain as to what to expect from the interest rate announcement next week. Poloz also stressed that the bank—as always—remains dependent on new national spending and oil market forecasts. Again, not helpful for CAD traders.

CAD in Q3

Why would the BOC freeze rates for a third time? Does Canada have a new game plan that will reduce the dependancy on oil?

We all know that the Canadian economy is heavily dependant on oil, but the BOC says Canada is exploring projects to expand on influences outside the fuel markets in pursuit of growth in the second half of 2019. Just how they intend to do this is still unknown to the general public, although rumors of renewable energy are circulating.

Canadian export goods and international services are expected to increase thanks to popular and growing demand, but the BOC responded saying that the global trade tensions will affect data for the foreseeable future. Does Canada have an ace up its sleeve?

Trading CAD

Trend traders using technical analysis no doubt expect very few changes to CAD against its trading counterparts in the coming weeks. If you’re looking to make serious profits from the Canadian dollar, then you’d need to use much higher leverage, but beware If the BOC interest rate announcement drops a surprise and sends CAD prices in the wrong direction, you could see rapid losses immediately after the Canada Interest Rate Decision is released.

Follow CAD and be ready for a surprise on May 29

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