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HomeFOREXCanadian Dollar Weakened Against USD as Bank of Canada's Dovish Tone Looms

Canadian Dollar Weakened Against USD as Bank of Canada’s Dovish Tone Looms

In today’s trading, the Canadian Dollar experienced a decline compared to its U.S. counterpart, influenced by a drop in oil prices and lingering uncertainty in the market ahead of crucial data releases this week.


The economic calendar is slated to feature a pivotal rate decision from the Bank of Canada (BoC) and the release of U.S. Nonfarm Payrolls (NFP) on Wednesday, followed by Canadian employment data scheduled for Friday.


Market expectations point toward the BoC maintaining the current interest rates at 5%, with an 80% probability of potential rate cuts commencing at the BoC’s June meeting.


Market participants are carefully examining policymakers’ commentary and the accompanying press release for insights into the timing of potential rate cuts by the BoC. Should the Bank of Canada adopt a dovish stance, additional pressure on the Canadian Dollar is anticipated.

Analysts at Interchange Financial suggest that the BoC might be laying the groundwork for an upcoming interest rate cut by subtly leaning towards a dovish tone, a move likely to further weaken the Canadian dollar.

Moreover, analysts emphasize the sensitivity of the loonie to the wording and tone employed by the BoC, especially considering the ongoing influence of interest rate expectations on the Canadian dollar and the U.S. dollar (USD/CAD) currency pair.

Wednesday’s U.S. ADP employment data is expected to be closely monitored for signals regarding potential rate cuts from the Federal Reserve. Presently, traders are estimating a 70% likelihood of a Fed rate reduction in June, aligning closely with expectations for the BoC.

As for Canadian employment data, projections indicate a modest increase in the employment rate, with the economy anticipated to add 20,000 jobs in February. However, this pace is expected to be slower compared to the job additions reported in January.

On a technical level for the USD/CAD pair, analysts at FXStreet highlight the 1.3600 handle as the immediate near-term technical ceiling, emphasizing that prices continue to trade on the higher side of the 200-day Simple Moving Average (SMA) at 1.3477.