The Bank of Canada left the overnight interest unchanged and stated its opinion on the possibility of future rate hikes, sending the Canadian dollar straight south against all other major currencies today.
The loonie declined even against the US dollar, which is experiencing a rather bad day as of now. The CAD has been bullish before the rate decision was released by the BoC. While the market participants expected that the overnight rate target will be maintained unchanged at 1%, the reaction to the Bank’s statement was very negative for the Canadian currency. The statement suggested that the next rate increases won’t be happening very soon:
Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1%. This leaves considerable monetary stimulus in place, consistent with achieving the 2% inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.
The analysts believe that with the current inflation (1.4%) significantly below the regulator’s target of 2%, it’s hard to expect any rate-raising decisions. And, while the Canadian dollar has gained more than 5% against its US counterpart in 2010, its growth may be slowed down by the current monetary policy.
USD/CAD rose from 0.9874 to 0.9921 as of 15:55 GMT, following a drop to a 3-year low of 0.9837 before the BoC rate decision today. EUR/CAD went up from 1.3110 to 1.3284, while CAD/JPY fell from 83.73 to 83.38.
If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.
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