We are pleased to bring you the latest edition of the series produced by our colleagues in RBC Capital Markets, hosted by George Davis, CMT, the award winning Chief Technical Analyst for Fixed Income and Currency Strategy.
In this installment George reviews the outcome of the recent Bank of Canada interest rate decision. At the meeting, the BoC finally confirmed the peak in interest rates, lowering the overnight rate 25 bps to 4.75%, becoming the first G7 central bank to cut interest rates. In doing so, the BoC feels that monetary policy is restrictive enough to push inflation towards their 2% target. The BoC expects more cuts if inflation continues to ease going forward.
RBC Economics expects headline inflation to reach the BoC’s 2% target late this year, resulting in rate cuts at the next three meetings. Should RBC’s forecast materialize, it would imply CAD weakness going forward, taking USDCAD toward 1.4000. George sees an expected trading range for this month of 1.3400 to 1.3900 and suggests that USD sellers look to the 1.3800 level to start layering in trades.