USD/CAD shrugs off dovish sounding BoC Deputy Governor Beaudry, consolidates beneath 1.2750

• USD/CAD has largely ignored comments from BoC Deputy Governor Beaudry which, on balance, had a dovish tilt.
• The pair is consolidating just beneath 1.2750 and eyeing a move back towards multi-year lows just above 1.2700.

USD/CAD has consolidated in recent trade just beneath the 1.2750 level amid quiet pre-Asia trade. The pair closed Thursday FX trade with losses of around 70 pips or just under 0.6%.

Dovish Beaudry hints at further easing ahead, CAD snoozes

Bank of Canada Deputy Governor Beaudry recently spoke and outlined that the bank could cut rates further without going into negative territory if the economy went into a persistent downturn, before adding that other easing options included expanding its QE programme or employing yield-curve targeting.

In a Q&A following his initial speech, Beaudry was pressed on whether the bank is actively considering lowering rates, to which he replied that though nothing has been decided yet, this is a potential option and the bank is thinking about it.

Beaudry was also asked during the Q&A about how concerned he is regarding the strength of CAD. He replied that the exchange rate is very important for the outlook and that CAD strength is one element that the BoC is looking at when it puts together its January MPR.

Less dovishly, Beaudry reiterated the BoC statement’s comment about recent vaccine news presenting upside risk to the economy, adding that positive vaccine developments could lead to the bank re-evaluating its stance on the amount of stimulus that is needed.

Net-net, despite the lack of any negative reaction in CAD, Beaudry does seem to have opened the door to further BoC easing in January which, by the sounds of it, might well be aimed at curbing recent $CAD strength. If this is not what the BoC is doing, why would he make further easing the main topic of his speech?

As commodities rally and USD weakens into 2021, USD/CAD’s near-term bias remains to the downside, but any dovish BoC surprises over the coming weeks ahead of the January Monetary Policy Report will be worth considering for CAD bulls.