The Bank of Canada surprised the market by cutting interest rates today. The Canadian dollar tumbled, falling more than 1 percent, as a result. The drop was especially big against the US dollar as the Canadian currency reached the lowest level since March 2009.
The BoC cut its main interest rate by quarter of a percentage point to 0.5 percent during today’s policy meeting. While some analysts anticipated a rate cut, for the most part the Forex market was unprepared for such decision.
Unsurprisingly, the Canadian currency slumped after the announcement. The Federal Reserve, on the contrary, considers raising borrowing costs, making the US dollar perform especially well against its Canadian peer.
Hurting the loonie further, manufacturing sales came out weaker than economists have predicted. Sales were up just 0.1 percent in May while experts promised growth by at least 0.3 percent.
USD/CAD leaped from 1.2726 to 1.2938 as of 17:11 GMT today. EUR/CAD soared from 1.4010 to 1.4163. CAD/JPY tumbled from 96.92 to 95.73
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