BoC Interest Rate Decision (October 2019)
Posted on: 2019-10-30 • By BCR Market Event


The Bank of Canada left its cash rate at 1.75% as widely expected in September’s meeting. The Loonie strengthened following the announcement. Recent data shows that the Canada’s economy is operating close to potential. Economic indicators are continued stable and inflation are slightly above the target level 2%. For October’s decision meeting, the market is widely expecting the cash rate to remain unchanged at 1.75% amid an upbeat labor market and satisfactory inflation level.


Canada Interest Rate (%)


BoC Interest Rate Announcement History

Date                     Previous             Consensus         Actual

30 Oct 2019       1.75%                  1.75%

04 Sep 2019       1.75%                  1.75%                  1.75%

10 Jul 2019          1.75%                  1.75%                  1.75%

29 May 2019      1.75%                  1.75%                  1.75%

24 Apr 2019        1.75%                  1.75%                  1.75%

06 Mar 2019       1.75%                  1.75%                 1.75%

09 Jan 2019        1.75%                  1.75%                  1.75%

05 Dec 2018       1.75%                  1.75%                  1.75%

24 Oct 2018        1.5%                    1.75%                  1.75%

05 Sep 2018       1.5%                     1.5%                    1.5%



Opportunities can be found in statement


Gross Domestic Product (GDP)

Following temporary weakness in late 2018 and early 2019, Canada’s economy is returning to growth around potential, as expected. Growth in the second quarter appears to be stronger than predicted due to some temporary factors, including the reversal of weather-related slowdowns in the first quarter and a surge in oil production. Consumption is being supported by a healthy labour market. At the national level, the housing market is stabilizing, although there are still significant adjustments underway in some regions. A material decline in longer-term mortgage rates is supporting housing activity. Exports rebounded in the second quarter and will grow moderately as foreign demand continues to expand. However, ongoing trade conflicts and competitiveness challenges are dampening the outlook for trade and investment. The Bank projects real GDP growth to average 1.3 percent in 2019 and about 2 percent in 2020 and 2021.” Referring to BoC’s Monetary Policy Report – July 2019.

The Gross Domestic Product (GDP) in Canada expanded 1.6% in the Q2 2019 from two and half year low of 1.4% in the last reading. The data is formed a downward trend from Q2 2017. The central bank projects real GDP growth of 1.3% in 2019 and around 2% in 2020 and 2021. The slowing down of GDP growth was mainly affected by the oil price drop. The sloping down of GDP is enough to justify the rate cut, but it is unlikely to come in the next meeting.


Canada GDP Annual Growth Rate (%)


Inflation

“Inflation is at the 2 percent target. CPI inflation in July was stronger than expected, largely because of temporary factors. These include higher prices for air travel, mobile phones, and some food items, which are offsetting the effects of lower gasoline prices. Measures of core inflation all remain around 2 percent.” Referring to BoC’s Interest Rate Announcement – September 2019.

The annual inflation rate in Canada stood at 1.9% in September 2019, unchanged from August and below market expectations of 2.1%. Price growth was held back by a further decline in gasoline prices, which was partially attributable to continued low global demand for oil. CPI in Canada declined to 136.20 Index Points in September from 136.80 Index Points in August of 2019.


Canada Inflation Rate (%)



Technical View


USDCAD pair tested 1.3051 support level in this morning session. After that it jumps toward 1.3100 ahead of BoC rate decision meeting. In the 4 hours timeframe, MACD is gaining bullish momentum, RSI is moving above the neutral axis and Stoch is about to rebound from the oversold area. Focus on 1.3051 support, if the price breakthrough this level, the USDCAD pair would turning to bearish stance in the short run.  


USDCAD H4 Chart