Today is a critical day for the Canadian dollar thanks to an upcoming Bank of Canada rate hike decision. The almost universal consensus view is that the BoC will raise short-term rates by 0.25% to 1.25% later today. The currency is currently selling off against the US dollar thanks to a broad USD rebound. With the rate hike mostly priced in, many believe that the Canadian dollar is set to decline following today's Bank of Canada event. Significant short-term risks include ongoing NAFTA discussions. In recent history, the Canadian dollar sold off after anonymous US and Canadian trade officials stated that Trump was likely to walk away from the agreement. While our longer-term view on the Canadian dollar remains bearish, the main drivers of a weaker loonie remain on the horizon. Thanks to an ongoing crude oil bull market and enthusiasm for global growth, the Canadian dollar may keep strengthening in the short-term. Our short-term trending indicator is currently bullish, while our medium-term outlook has been upgraded to bullish as well.
The USD/CAD exchange rate is currently above 1.2450. The euro is down against the Canadian dollar, with EUR/CAD currently above 1.5220. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7140.
Looking at economic data and events this week, all eyes will be on the BoC's upcoming interest rate decision and statement later today. There are no other major economic releases or events this week. Last week, the Bank of Canada's Business Outlook Survey suggested an upbeat outlook for future growth.
As the Canadian dollar strengthens, we are upgrading the currency to bullish in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.