Wednesday is shaping up to be an important day for the US dollar / CAD dollar exchange rate pairing. The Bank of Canada is scheduled to announce its interest rate decision, while in the US, they will be releasing US inflation data, which is expected to weigh heavily on the Fed’s interest rate decision in May.
The US core inflation numbers are expected to have increased by around 0.5% over the past month and 5.5% yearly, which is the same as the previous reading. If inflation continues to remain stubbornly sticky, this will all but guarantee a 25-basis point increase by the Federal Reserve Bank in May.
In Canada, there is strong market sentiment that the Bank of Canada will leave its benchmark rate unchanged at 4.50%, despite some very strong economic data coming out of the Canadian economy in the last two weeks.
If both central banks do as expected, the Canadian dollar will continue its gradual increasing in value against the US dollar. However, if the Bank of Canada decides to be aggressive and push through an unexpected interest rate hike of about 25 basis points, expect the Canadian dollar to skyrocket in value against the US dollar.
The Canadian Dollar is currently trading at 1.3470 against the US dollar.
