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BOC leaves rate at 0.50% – USD/CAD crashes

A surprise decision by the Bank of Canada not to cut rates. Did the low value of the Canadian dollar make them feel comfortable with 0.50%? Partially so. Also last year they surprised, but to the dovish side. This time they seem to have ended the seemingly unstoppable rally of Dollar/CAD.

USD/CAD is now falling, with the low at 1.4488 and the pair bouncing quickly to 1.4530.

In the statement they said that the risks to the inflation profile are balanced. Indeed, inflation is not too low in Canada, partly thanks to the weak C$ which made imports prices higher and despite the big fall in oil prices which pushes exports and also local inflation lower.

The statement acknowledges the fall in oil prices, but is certainly not dovish:

All things considered, therefore, the risks to the profile for inflation are roughly balanced. Meanwhile, financial vulnerabilities continue to edge higher, as expected. The Bank’s Governing Council judges that the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.

In Canada, the employment situation has been  quite positive in the latest report, and that could have kept the BOC abay.  USD/CAD traded around 1.4610 before the release. The range for the day is around 200 pips.

The moves, while quite significant, could be limited by a wait to hear from the governor. They could  certainly extend if he remains his optimistic self.

Here are some previews:

USDCAD January 20 2016 BOC no cut

Governor Stephen Poloz will hold a press conference at 16:15 GMT, and beforehand we have the weekly release of Crude Oil Inventories in the US,  a publication that always shakes the loonie. The latest blow to oil prices came from  the  lifting of sanctions on Iran.  WTI is trading around $28.50, with every bounce looking weak. An emergency OPEC meeting, which is on the cards, can do little to curb demand.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.