As expected, the BOC left the interest rate unchanged at 0.75% once again.
The statement is quite balanced and so is the initial USD/CAD reaction.
The Bank says that inflation risks have not really changed and remain around 1.6%-1.8%. The relatively higher CPI is blamed on the weaker currency, despite some kind of comeback.
Canada, which is reliant on US growth and this is expected to make a comeback in Q2 after a poor Q1, as the BOC acknowledges. Also regarding Canadian growth, there is no change since the April monetary report.
And stability is also seen in future interest rates, with the key phrase saying that the current degree of monetary stimulus remains appropriate.
The Bank of Canada was widely expected to leave the interest rate unchanged at 0.75%. The focus was on the statement where some optimism was expected after the recent data.
USD/CAD traded around 1.2450, on high ground but below the peak of 1.2483 seen earlier in the day.
— more coming —
Earlier in the day, the US dollar surged and the loonie suffered, extending its losses. This trend has been going on for a second week in a row.
The BOC shocked markets with a rate cut in January, that was explained as an “insurance policy” against falling oil prices. Since then, Poloz and his team were quite upbeat and the prospects of another cut seem low.
In our latest podcast, we discuss commodity currencies, oil hedging and preview next week’s events.
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