Global macro overview for 25/10/2017:
The Bank of Canada Overnight Rate decision will be published today. The market participants expect BoC to keep the overnight rate a 1.0%. With the decision, a Monetary Policy Report will be published with an update of economic forecasts. The BoC press conference is scheduled at 03:15 pm GMT.After two rate hikes of 25 bps in a row in July and September now it was time to pause. The latest comments from BoC indicate this. President Poloz reminded that there is no "mechanical approach" to monetary policy and the bank is in "intensive mode of subject data". Without a doubt, the Bank needs to assess the impact of recent tightening on the economy, credit conditions, and appreciation of CAD, and these are not yet seen. In addition, last week's blow to sentiment was disappointing data on consumption and prices. In August, retail sales fell unexpectedly by 0.3%. m / m, erasing a good result from July. September CPI at 1.6%. y / y fell below the expected 1.7 percent. (with an inflation target of 2%). Earlier, the survey of business sentiment showed a decline in employment and investment trends.
Disappointing retail and inflation data have ruled out a third overnight rate hike in a row. The Bank of Canada needs time to assess its impact on the economy but remains in hawkish. It is doubtful, however, that the bank will commit itself to a further increase in December.
Let's now take a look at the USD/CAD technical picture at the H4 time frame. The bulls have managed to break out above the technical resistance at the level of 1.2662 and just before the interest rate decision, the price is heading towards the next technical resistance at the level of 1.2777 in overbought market conditions. Nevertheless, if BoC will decide not to hike the interest rate today, the level of 1.2777 will likely be tested and possibly even broken.
