- The Bank of Canada is widely expected to cut rates by 25 basis points, which could impact market sentiment and the USD/CAD pair
- The release of Canada’s August employment report, coinciding with the US nonfarm payrolls report, is likely to increase uncertainty and volatility in the USD/CAD pair
The Bank of Canada (BoC) is anticipated to lower rates by 25 basis points on Wednesday, bringing the policy rate down to 4.25%. This expectation follows a recent CPI report that indicated further easing in core inflation, coupled with weaker labor market data.
While a 50-basis point cut seems unlikely, it can’t be entirely dismissed. In the July monetary policy meeting, Governor Tiff Macklem suggested that the focus may shift towards supporting economic growth rather than solely controlling inflation.
Additionally, Canada’s August employment report is set to be released on Friday, coinciding with the US nonfarm payrolls report. This timing could heighten uncertainty and volatility in the USD/CAD pair.
A key level to watch will be the 1.3570-1.3600 zone, which previously served as a significant support area. Whether this area will be re-tested remains to be seen.
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