The Governing Council of the Bank of Canada is expected to maintain its accommodative monetary policy this week, and no massive changes are anticipated to take place following its previous actions at the end of March.
Members of the Council have expressed readiness to increase the scope of the Bank’s asset-purchasing program if the Council deems such actions necessary, however, this looks highly unlikely at present.
The initial market forecasts project no changes to the interest rate, which was lowered to 0.25 per cent in Late-March.
The focal point of Wednesday’s meeting is going to be the publication of the economic forecasts, which are also expected to reflect on the recovery progress, if any, that has been made so far since the BOC’s last intervention.
“The Bank’s efforts have been primarily focused on ensuring the availability of credit by providing liquidity to help markets continue to function. To promote credit availability, the Bank has expanded its various term repo facilities. To preserve market function, the Bank is conducting Government of Canada bond buybacks and switches, purchases of Canada Mortgage Bonds and banker’s acceptances, and purchases of provincial money market instruments. All these additional measures have been detailed on the Bank’s website and will be extended or augmented as needed.”
The Governing Council would most likely base its future intervention-policies on the observed developments in the Canadian labour market. The unemployment rate jumped by 2.2 per cent to 7.8 per cent in March, which was caused by the COVID-19 economic fallout.
Canada Unemployment Rate. Image source: TradingEconomics.com
These recent developments are concerning but expected in light of the global trends of worsening employment conditions. That is why the Governing Council of the BOC is likely to remain vigilant, but open to the possibility of making future adjustments to the monetary policy.
Meanwhile, the Canadian dollar has remained relatively unaffected by the recent macroeconomic events that have transpired over the weekend. Nevertheless, the Loonie is likely to be strengthened over the midterm as the crude oil market starts to stabilise.
The USDCAD continues to thread within the boundaries of a Bullish Pennant, but the price action is currently testing the strength of the major support level at 1.39545.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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