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Inflation "fake fever"? The Bank of Canada takes action tonight, will the Canadian dollar continue to fight back?
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: Inflation is "falsely subsided"? The Bank of Canada takes action tonight, will the Canadian dollar continue to fight back?" Hope this helps you! The original content is as follows:
Wednesday, December 10th. USD/CAD traded near 1.3840 during the North American session, becoming one of the focuses of market attention. The Bank of Canada will announce its latest interest rate decision at 22:45 tonight. This event may have a direct impact on the short-term trend of the Canadian dollar. Although the bank has cut interest rates twice in a row before, recent policy signals show that it is cautious about the current interest rate level and believes that the existing interest rates are "roughly at an appropriate position." If this stance is continued at this meeting, it may limit the Canadian dollar's further downside and also affect the upward momentum of the US dollar against the Canadian dollar.
The Canadian economy faces the dual challenges of external demand fluctuations and internal inflation stickiness. The latest consumer price index shows that the headline CPI growth narrowed to 2.2% year-on-year, but the www.xmtraders.common, excluded and median CPI in the core indicators are still at 2.7%, 3.0% and 2.9% respectively, significantly higher than the Bank of Canada's 2% target. This means that despite the slowdown in nominal inflation, underlying price pressures remain, providing a www.xmtraders.complex backdrop for monetary policy.
It is worth noting that the Bank of Canada lowered its benchmark interest rate by 25 basis points to 2.25% at its last interest rate meeting in late October, in line with general market expectations. However, the more critical information came from the statement after the meeting - policymakers made it clear that the current interest rate level is "roughly at an appropriate position", which can not only support the economy to cope with the impact of changes in the international trade environment, but also be enough to keep inflation closer to the target. This wording was interpreted by the market as a signal to pause interest rate cuts, reflecting policymakers' efforts to find a balance between stimulating economic growth and controlling inflation. This meetingIf it is agreed to keep interest rates unchanged, it will further consolidate this position and indicate that the Bank of Canada is not eager to follow some other developed economies into a rapid interest rate cutting cycle.
Market performance
From the daily perspective, the US dollar against the Canadian dollar has shifted downward since the high of 1.4139. The recent negative line has been enlarged and fell below the previous consolidation area, with the latest price at 1.3840. During the decline, it touched as low as 1.3799, and then the small entity K-line and lower shadow appeared, indicating that the short-term selling pressure has eased but is still weak.
MACD’s DIFF-0.0043, DEA-0.0018, and column value-0.0049, the fast and slow lines are below the zero axis and spread, and the kinetic energy is bearish and has not significantly converged. RSI(14) is about 33.8, which is in the low area. Structurally, the vicinity of 1.3799 is the near-end support reference, and the upper area near 1.3970-1.4040 and 1.4110 is the early intensive trading and falling steps. Short-term fluctuations may fluctuate around 1.3840, and it is necessary to continue to observe the deviation between volume and indicators.
Looking to the future
The Bank of Canada’s monetary policy decision will be announced at 22:45 tonight, followed by Governor Steve Macklem’s press conference at 23:30. The market generally expects the bank to remain on hold and keep its benchmark interest rate unchanged at 2.25%. What really deserves attention is the change in wording of the post-meeting statement and its guidance on future policy paths. If the statement reiterates the judgment that "interest rates are at an appropriate level" and emphasizes that inflation is still sticky, it may strengthen the market's expectations that there will be no further easing in the short term, thereby providing support for the Canadian dollar. On the other hand, if the risk of economic downturn is increased or the fall in inflation is accelerated, it may be interpreted as indicating that there is still room for interest rate cuts in the future, thereby putting pressure on the Canadian dollar.
Taken together, the current operating logic of the US dollar against the Canadian dollar is mainly dominated by two major factors: one is the relative tightness of the monetary policies of the United States and Canada, and the other is the trend of bulk www.xmtraders.commodities, especially crude oil prices. At this stage, the Bank of Canada has shown strong policy determination and has temporarily shelved further interest rate cuts. If the Canadian job market remains solid in the www.xmtraders.coming months and household spending does not shrink significantly, the likelihood that the Bank of Canada will maintain current interest rates will further increase, thus limiting the upside potential of USD/CAD.
The above content is all about "[XM Foreign Exchange Platform]: Inflation "fake fever"? The Bank of Canada takes action tonight, will the Canadian dollar continue to fight back?" It is carefully www.xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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