Bank of Canada interest rate decision is due at 1500 GMT (10 am ET) on Wednesday, March 1
To be clear, the Bank of Canada isn't going to make a move on Wednesday. Economists are unanimous and the OIS market is barely humoring the possibility.
There is a zero percent chance of a hike priced in and a 0.6% chance of a cut. For the April and May decisions, the cut chance rises to 2.0% and 4.0%, respectively.
What the market will be looking for is a change from the current neutral language. The key paragraph in the Bank of Canada statement is always at the end. This is how it read in the most-recent statement.
"In the context of a projection that is largely unchanged, the Bank's Governing Council judges that the current stance of monetary policy is still appropriate and maintains the target for the overnight rate at 1/2 per cent," it said.
That was a shift to a more neutral stance but trading in the previous decision on January 18 swung in the press conference when Poloz said a cut was still 'on the table'. USD/CAD rose nearly 3 cents in the following three days.
This time around, the Canadian dollar has been beaten up for two days ahead of the statement. That's probably a result of February month-end flows but it could also be speculation about a dovish BOC.
Overall, expectations are low for any kind of market move at this meeting. That's especially true because there will be no MPR or press conference afterwards. One area that could spark some trading is CAD commentary.
The latest statement said: "The Canadian dollar has strengthened along with the US dollar against other currencies, exacerbating ongoing competitiveness challenges and muting the outlook for exports."
The Canadian dollar is slightly weaker since then so the language may be tweaked. If it's removed altogether, that could be seen as a green light for CAD strength (and USD/CAD weakness).
