Societe Generale analysts notes that the Bank of Canada (BoC) is expected to keep its policy rate at 2.25% for a fourth consecutive meeting, while higher inflation expectations could push rates toward the neutral range midpoint later this year. They highlight that the Canadian Dollar (CAD) has gained about 2% versus the US Dollar (USD) in April, but warn that the upcoming United States-Mexico-Canada Agreement (USMCA) review may prompt profit-taking in May, with clearly defined support and resistance levels for USD/CAD.

BoC stance and USMCA risks for CAD

"Separately, the BoC is set to leave the policy rate unchanged at 2.25% for the fourth straight meeting."

"The rise in inflation expectations by businesses and households was evident in the latest business survey and could tempt the central bank to raise rates from the current 2.25% closer to the mid-point of the neutral range (2.75%) later this year, and reducing the negative spread vs Fed funds barring a deterioration of the economy and escalation of tariff hostilities with the US."

"The CAD has recovered around 2% against the dollar in April but the upcoming review of USMCA could cause investors to take profits into May."

"Support levels are situated at 1.3600/1.3570. Resistance rest at 1.3733 and 1.3815."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)