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 percent, 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 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent 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 percent) significantly below the regulator’s target of 2 percent, it’s hard to expect any
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.
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