BOC Interest Rate Decision on Wednesday, April 18th, 2018 at 14:00 GMT

Canada vs. United States: 1.25% to 1.75%

Last week, the Bank of Canada (BOC) business outlook survey showed overall business sentiment as positive and above the historical average, despite some signs of cooling, compared to January’s results.

Growing optimism that an initial NAFTA deal is within reach hasn’t led people to expect faster interest rate hikes, particularly with rising US-China tensions affecting global markets.

Investors indicate there is about a 20% chance of a rate increase, as Governor Stephen Poloz and BOC policy makers are looking for an indication that the nation can withstand higher borrowing costs.

Will the BOC find such reasons and signal an imminent rate hike, or will it stay put on the current policy?

Why is Canada’s Interest Rate Decision Important?

Bank of Canada (BOC) governing council members come to a consensus on where to set the rate.

Traders watch interest rate changes closely, as short-term interest rates are the primary factor in currency valuation.

The central bank has raised rates 3 times since July 2017, and markets see a nearly 80 percent likelihood it will hike again this July.

Market experts are divided in 2 groups:

• Bullish factors for the CAD
  1. The economy isn’t feeling any particular pain from policy changes in the US.
  2. Inflation is expected to remain within the 1% to 3% target.
• Bearish factors for the CAD
  1. US protectionism has delayed some investments.
  2. There are labour shortages in some regions.

What do you think? Will the USDCAD rise or fall?