Bank of Canada Maintains Policy Rate Amidst Global Economic Uncertainty

Summary:

The Bank of Canada announced its decision to keep the overnight rate steady at 5%, continuing its policy of quantitative tightening.

BUY GBPCAD

Close Time

CLOSED

1.71590

Entry Price

17500.00000

1.70000

1.88087 +0.00335 +0.18%

0.6

Pips

Loss

1.70000

1.71584

Exit Price

1.71590

Entry Price

17500.00000

The Bank of Canada announced its decision to keep the overnight rate steady at 5%, continuing its policy of quantitative tightening. While the global economy is anticipated to grow at about 3%, the US economy has shown resilience, although growth is expected to moderate in the latter half of the year. Meanwhile, the euro area is projected to gradually recover from its current weak growth trajectory.

In Canada, economic growth stagnated in the second half of last year, leading to an excess supply situation. Labour market conditions are showing signs of easing, with slower employment growth and a gradual increase in the unemployment rate, reaching 6.1% in March. However, there are indications that wage pressures may be moderating.

Looking ahead, economic growth is forecasted to improve in 2024, driven by strong population growth and a recovery in household spending. Residential investment is strengthening in response to robust housing demand, while government spending is also contributing to growth. Business investment is expected to recover gradually, and exports are anticipated to continue growing solidly.

The Bank forecasts GDP growth of 1.5% in 2024, 2.2% in 2025, and 1.9% in 2026, with the economy gradually absorbing excess supply through 2025 and into 2026.

Inflation in Canada slowed to 2.8% in February, with easing price pressures across goods and services, although shelter price inflation remains elevated. Core measures of inflation have also moderated, with the Bank expecting CPI inflation to be close to 3% in the first half of the year, moving below 2.5% in the second half, and reaching the 2% target in 2025.

Given the outlook, the Governing Council decided to maintain the policy rate at 5% and continue normalizing the Bank’s balance sheet. While inflation remains elevated, recent months have seen further easing in CPI and core inflation. The Council will monitor the sustained downward momentum in inflation and key economic indicators, remaining committed to restoring price stability for Canadians.

TECHNICAL VIEWPOINT

GBPCAD 4 HOUR CHART

The GBPCAD has breached the supply area on the 4-hour chart, indicating a prevailing buyer bias. Following a retest of the 1.71500 level, a potential rally towards the next significant resistance at 1.7500 is anticipated. However, a drop below the 1.7000 level would signal a shift in momentum, with bears likely gaining control of the market.

with the GBPCAD displaying strength above the supply area and a retest confirming buyer momentum, attention turns towards a potential move towards the 1.7500 resistance level. Nevertheless, vigilance is warranted, as a dip below 1.7000 could usher in a bearish scenario.

TECHNICAL RECOMMENDATION

BUY GBPCAD

ENTRY: 1.71540

STOPLOSS: 1.70000

TAKE PROFIT: 1.75000

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