USD/CAD Daily Fundamental Forecast – September 7, 2017

The BOC surprised the markets yesterday as it announced a rate hike when a majority of the market was quite convinced that there would not be a rate hike this month around. This was their second consecutive hike and this helped the CAD to rocket higher across the board, especially due to the fact that this was something that the market had not expected to happen anytime soon.

USDCAD Crashes Lower on Rate Hike

The market was expecting the BOC to hold the rates for now though they had begun to price in one more rate hike before the end of the year. But the BOC has always tried to be hawkish and ahead of the market and unlike the other central banks, the BOC does not dilly dally on its decisions. Even the last rate hike was done in a situation when it wasnt really a necessity and they could have delayed it if they had wanted to. But the BOC decided that it was time and they also decided that they do not want the market to waste their time in trying to outguess the BOC and they went ahead. The same case happened yesterday as well.

They pushed through the rate hike yesterday when none was expected and none was necessary but they stuck to their hawkish stance. This led the USDCAD pair to crash through 1.24 and move towards 1.21, a move that was worth 279 pips in less than a few pips. The pair has since recovered and trades just above the 1.22 region as of this writing but this recovery is likely to be temporary and we are going to see the downtrend, that has been in existence for the past couple of months, to continue in the short term.

The BOC also left the door open for another rate hike this year by saying that theur future policy would be guided by incoming economic data, which has been strong and supportive all along. This should keep the downtrend going for some more time. Today, we do not have any major news from the US or Canada but we should continue to see the pair under pressure for the day.