As expected, the Bank of Canada left the interest rate unchanged at 0.75%. This come after a surprising rate cut in January, but after solid inflation numbers and a stabilization in oil prices seen afterwards.
USD/CAD is reacting with a fall to 1.2450 on some relatively hawkish talk.
The statement includes a line saying that inflation risks are more balanced now. The rate cut announced in January, which was then described as an “insurance policy”, was now justified as a tool that will mitigate the negative effects of the drop in oil prices: financial conditions are easier.
USD/CAD traded around 1.25 before the publication and is now lower. The stronger Canadian dollar comes in contrast to the stronger US dollar seen following the relatively upbeat ISM Non-Manufacturing PMI.
This means that once the dust settles in the US, the pair could further fall.
The Canadian dollar also enjoyed better than expected GDP data yesterday.
Here is how the move looks on the chart:
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