By Ketki Saxena
Investing.com – The Canadian Dollar posted moderate gains vs its US counterpart today, as traders double down on the loonie ahead of a rate decision from the Bank of Canada tomorrow.
The BoC is widely expected to keep rates on hold at 5%, after a hotter than expected domestic December CPI print repriced expectations for how soon the BoC will begin to cut rates.
Money markets now expect the first rate cut, a 25-basis-point move in June. Prior to the release of the most recent inflation data, markets had almost fully priced in rate cuts as early as April.
The US dollar meanwhile rose against a basket of major currencies, as rising Treasury yields and delayed expectations of Fed rate cuts supported the greenback.
Looking ahead for the pair, the BoC’s interest rate decision will serve as the next impetus. However, analysts at Monex Canada note that “Even with the BoC set to publish a new set of macro forecasts… Wednesday’s decision [will be] fairly benign for markets.”
And with limited Canadian economic data on the docket for the remainder of the month, “The USDCAD pair is likely to close out January below our one-month forecast of 1.36, unless risk conditions significantly deteriorate in the remaining days.”
On a technical level for the pair, analysts at FXStreet note, “The USD/CAD continues to get mired in technical congestion between the 50-day and 200-day SMAs, with price action consolidating near the 1.3450 to 1.3500 region.”