USD/CAD slumps to 1.32 area despite BoC’s cautious tone

• Bank of Canada leaves policy rate unchanged at 1.75% as expected.
• US Dollar Index falls on Fed’s Bostic’s dovish remarks.
• BoC Governor Poloz to speak at a press conference next.

The USD/CAD pair fell to its lowest level since early December at 1.3178 in the early NA session and rebounded modestly. As of writing, the pair was down 0.42% on the day at 1.3220.

AIn a widely expected decision, the Bank of Canada kept its policy rate unchanged at 1.75%. In its policy statement, the bank noted that the drop in global oil prices had a material impact on the outlook and added that consumer spending and housing investment had been weaker than expected. “Weighing all of these factors, Governing Council continues to judge that the policy interest rate will need to rise over time into a neutral range to achieve the inflation target,” the BoC concluded.

Despite the cautious tone that the bank adopted, however, the broad-based selling pressure surrounding the greenback weighed on the pair. While speaking at an event in Tennessee, Atlanta Fed President Raphael Bostic argued that the Fed’s policy could move in either direction and added that he was open to a rate cut if downside risks on the economy were to materialize. The US Dollar Index, which spent the majority of the day in a tight range a little below the 96 mark, fell sharply on these comments and touched its lowest level in nearly three months 95.20. At the moment, the index is losing 0.65% on the day at 95.30.

Markets are now waiting for the BoC Governor Poloz’s press conference. Later in the day, the FOMC will be releasing the minutes of its December meeting as well.

Technical levels to watch for