FXstreet.com (Barcelona) - After capping its recovery from 1.0485 at 1.0560and falls to 1.0490 during the European session, the USD/CAD has risen around 60 pips to test back the 1.0560 intra-day high. Currently the pair is trading close to 1.0550, 0.30% above today's opening price action at 1.0512.
Bank of Canada Is expected to hold unchanged its interest rate at 0.25%. BoC has kept the rate at 0.25% since April 25.
Michael J. Malpede, analyst at Easy Forex, comments how the BoC decision will affect the USD/CAD after the improving Canadian economy: The trade will be looking to see whether the Bank of Canada continues to express concern about the impact of the strong CAD, and its forecast for Canada's inflation and recovery. BOC Governor Carney has expressed concern about the impact of strong CAD. In October Carney said that the strength of the CAD had more than offset positive economic developments in Canada and he warned that BOC may take action to stop CAD appreciation. Carney also noted that the strength of the CAD makes it difficult for the BOC to steer inflation back to BOC's 2% inflation target. We expect the BOC to moderate its concern about CAD strength in light of the improvement in the Canadian economy and rising inflation as the impact of the CAD appears to be less pronounced. At the October policy meeting the BOC forecast that the economy will grow by 3% in 2010 and 3.3% in2011. Inflation is expected to return to the 2% target in Q3 2011.