Bank of Canada Governor Stephen Poloz speaks

Economic Events Outlook, Dec 5 – Is the BOC Raising Key Interest Rates Today?

Posted Wednesday, December 5, 2018 by
Arslan Butt • 2 min read

Good morning, fellas.
It’s going to be another important day of the week as the Bank of Canada is due to release its monetary policy decision. Meanwhile, investors will also monitor the UK Services PMI and ECB President Draghi’s speech. But the major focus will be on BOC as we can try to capture quick trades in both cases whether they hike the rate or not. Here’s our trade plan for today:

Today’s Economic Events

Eurozone – EUR
ECB President Draghi Speaks – At 9:30 (GMT), the ECB President Mario Draghi is due to deliver opening remarks at an ECB conference on bank supervision in Frankfurt. As head of the ECB, which controls short-term interest rates, he has more influence over the Euro’s value than any other person.

Traders watch his public engagements as they are often used to drop subtle clues regarding future monetary policy.

Great Britain Pound – GBP
Services PMI – Today at 10:30 (GMT), the Markit is due to release the UK services PMI figures. For freshers, it’s a survey of purchasing managers which asks respondents to rate the relative level of business conditions, including employment, production, new orders, prices, supplier deliveries, and inventories.

The figure above 50 indicates expansion of the economy and vice versa. Yet, we compare the actual release with the forecast and previous one in order to determine the market trend. Today, economists are expecting a rise of 0.3 to 52.5 vs. 52.2 figure in November.

Bank of Canada & Monetary Policy Decision

Here comes the chief. At 14:15 (GMT), the Bank of Canada will be releasing the Overnight Rate along with BOC Rate Statement. It’s widely expected to keep the hike on hold at 1.75% today.

Lately, most central banks are following in the footsteps of the Federal Reserve. For instance, the Bank of Japan, People’s Bank of China, European Central Bank, Bank of England and now, the Bank of Canada, are also shifting their monetary policy from dovish to hawkish.

Will BOC Raise Key Interest Rates Today?
For the time being, the Canadian economy continues to take advantage of strong US activity and should see a modest 2.5% growth rate overall for 2018. We may see an insignificantly moderate pace of growth in 2019, reflecting a more moderate expansion in the US.

Although it’s widely expected to keep the rates on hold, the recent meeting and new deals between the US and Canada extend support to the hawkish policy. However, it’s still a bit early to expect a rate hike in December, while the previous rate hike was in September.

What Happens If BOC Hikes The Rate?
If you ever noticed, the BOC rate hike pattern is very similar to the Fed and we are expecting a rate hike from the US economy in December. It that’s true, then we should keep a closer eye on the BOC today as they have a chance to play with monetary policy before the US bank does.


USD/CAD – Daily Chart
So, in case the Bank of Canada decides to hike the rate from 1.75% to 2%, it would be a great opportunity to buy the Loonie. Keep in mind though, the USD/CAD is an indirect currency pair and you need to sell this pair to buy the Canadian dollar.

All the best, and stay tuned for more exciting updates!

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About the author

Arslan Butt is our Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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