It is Bank of Canada day and all eyes will be on the central bank and its Monetary Policy Report to assess the Bank’s current thinking about the economic picture and any potential impact on the USD to CAD exchange rate. As usual, if there are any indications that the Bank may look to dial back stimulus sooner than expected, then you can expect the Canadian dollar to gain against peers. Also expected this morning is the March inflation report. Yesterday, the Canadian dollar was one of the weakest major currencies and lost 0.7% through the course of the day. That move came as oil prices traded lower in response to a deteriorating Covid situation globally. In particular, India, a large oil buyer, has been reporting record number of cases. The European Covid picture also remains difficult with many large countries on the continent in various stages of a lockdown. Adding to the headwinds for the Canadian dollar yesterday was the modest retreat of stocks, to which the Loonie has been loosely correlated recently, from recent record levels. The currency is now trading near the low-end of the range in which it has been trading for the last month.
