The Bank of Canada left the interest rate unchanged at 0.50% as widely expected. However, they expressed worries about the economy going forward.
While the team led by Poloz do expect a rebound in H2 (the economy squeezed by an annualized 1.6% in Q2 2016), they are concerned. Compared with their July decision, they see lower forecasts, partially due to the weak first half.
Also on their mandate, inflation, they see some tilt to the downside. Deflation is a global problem, even in Canada, where the exchange rate has fallen quite a lot.
USD/CAD was trading just above support at 1.2830 throughout the day. Just before the decision, the pair fell just below this level, to 1.2822. From there, we saw a rise to 1.2892, still a safe distance from resistance at 1.2910.
Do they know something about the jobs report on Friday? Canada suffered from job losses lately, and markets expect a rebound in the August report scheduled for September 9th. However, nothing is certain.
Another blow for the loonie came from the Ivey PMI, which dropped to 52.3, showing much slower growth than 57 seen last time and 55.5 last time.
For a more in-depth dive in the C$, check out this vide: Currency of the week: USD/CAD – key events and good technical behavior
more coming
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