The Bank of Canada is expected to maintain the interest rate in the country unchanged at 1.75 per cent on its monetary policy meeting scheduled for Wednesday. Naturally, the two biggest consideration points for the Governing Body of the BOC that could necessitate an interest rate change are unemployment and inflation.
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As it was already shown, employment statistics demonstrate the resilience of the Canadian labour market, despite the observed short-term rise of unemployment with 0.3 per cent in the previous two months. Inflation, on the other hand, is being directly influenced by global economic trends and stagnation in international trade. During the last monetary policy meeting, the Bank of Canada commented on the situation by saying that:
“Evidence has been accumulating that ongoing trade tensions are having a material effect on the global economic outlook. […] Trade conflicts between the United States and China, in particular, are curbing manufacturing activity and business investment and pushing down commodity prices. […] CPI inflation will likely dip this year because of the dynamics of gasoline prices and some other temporary factors. As slack in the economy is absorbed and these temporary effects wane, inflation is expected to return sustainably to 2 percent by mid-2020.” [source]
Overall, the global tensions have remained almost unchanged since the BOC’s last monetary policy meeting, and the deadlock between China and the US remains unchanged. Given the similarity in the economic circumstances in July and August, the Bank of Canada is expected to remain vigilant and to continue observing the situation without implementing any significant changes to the monetary conditions in the country at the present rate.
The EURCAD is currently trading at 1.46238, which is close to 50 pips away from the fundamentally important support level at 1.45750, which is a price level that has been last broken in Late-September 2017.
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