Canadian Dollar Strengthens on Not So Dovish Rate Statement

The BOC acknowledged the European worries, but still sees positive things in the Canadian economy. No change in the rates was expected, but the rhetoric of the rate statement was expected to turn dovish.

USD/CAD is sliding lower, getting further away from resistance. The move isn’t huge.

Earlier in the year, expectations for a rate hike by the BOC were strong and the tone of the statements was hawkish. These diminished as the global situation deteriorated.

From the statement:

Although economic growth in Canada was slightly slower than expected in the first quarter, underlying economic momentum appears largely consistent with expectations.

All in all, the statement is quite balanced and so dovish as expected.

Half an hour before the release of the rate decision, Canadian building permits were released and they were a big disappointment: a drop of 5.2%, much worse than a marginal drop of 0.3% that was predicted.

On the other hand, the recent job reports were absolutely superb and showed that the Canadian economy is relatively resilient.

USD/CAD traded at around 1.04 before the decision, after failing to break above the 1.0423 line beforehand.

For more, see the Canadian dollar forecast.