BOC Interest Rate Decision 07/21/09

BOC (Bank of Canada) council members meet 8 times a year and discuss where to set their current Interest rate. Since interest rate is directly related to inflation, it is arguably THE MOST HIGH IMPACT news for currency traders who trade the CAD crosses.

Because of the low level that BOC has kept its interest rate and the current market condition, I don’t expect any surprises from the expectation of an unchanged verdict at 0.25%, as many BOC officials also confirm with their previous statements that the official rate will be kept at the current level until spring of 2009.

However, BOC Governor Carney will also deliver a statement along with the
interest rate decision, which may or may not speculate on Canada’s economic
outlook. If indeed this statement focus on better outlook due to recovery than
prolonged agonizing recession, we should see across the board strengthening of
CAD against all majors, where I’ll be looking for a SHORT trade on the USD/CAD
pair; if the opposite is true, then I’ll be looking to BUY USD/CAD instead.

UPDATE: BOC decided to leave rates unchanged, however a strong CAD sentiment took place after the rate decision without much fundamental reason, so I went ahead and called a BUY trade at the bottom, +25 pips of profit with potential at over 100+.

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