Forex news: USD/CAD going nowhere ahead of BoC rate call

on Mar 4, 2014

**, Tuesday 4 March:**

Market risk aversion has eased today since reports that Russian troops on military exercises near Ukraine have been ordered back to base. After a week of silence on the Ukrainian situation, Russia’s president, Vladimir Putin, fronted a press conference today and said there was no need to send troops into Ukraine “yet” but described the new regime in Kiev as an “unconstitutional coup”.

Despite better news from Ukraine which has resulted in some hefty currency moves, the USD/CAD remains largely unmoved in the high 1.10s.
In their take on the Ukraine crisis, analysts at Toronto-Dominion Securities write: “Easing geopolitical tension cut both ways for the CAD in a sense – oil and gold prices are lower but risk appetite has recovered – leaving the market still searching for a stronger sense of direction.”

The TD Securities strategists say that the currency pair “feels more consolidative ahead of the Bank of Canada policy meeting tomorrow”. The BoC is widely expected to hold policy rates steady at one percent for the 28th consecutive meeting, going back more than three years. The central bank will announce its monetary policy decision alongside the release of the official rate statement, at 15:00 UTC.

TD Securities thinks that the bank is “unlikely to dial up the dovish rhetoric even more” as the recent run of better-than-expected Canadian economic data (CPI, GDP) “simply do not support a further shift in the BoC’s policy position at this point”.
The TD Securities assessment: “To some extent, the market has recognized these developments and priced them into the exchange rate but there is still a chance that the absence of a clearly dovish signal from the policy statement may drive the CAD a little higher still.”

The Canadian investment bank sees tomorrow’s policy meeting as keeping the USD/CAD “capped in the 1.11 area” but warns that “the short-term picture turns USD-bullish again above 1.1145”. It sees support in the low 1.10s holding in the near term, with the major layer of support lying near the 47-day low of 1.09099.
Right now, the USD/CAD is trading at around 1.1082, up 0.02 percent intraday.


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