The Canadian dollar rallied today after the Bank of Canada made a surprise decision to keep interest rates unchanged instead of cutting them as the majority of analysts had predicted. Earlier, the currency reached the lowest level in 12 years against the US dollar before bouncing higher.
The BoC kept interest rates on hold, announcing:
All things considered, therefore, the risks to the profile for inflation are roughly balanced. Meanwhile, financial vulnerabilities continue to edge higher, as expected. The Bankâs Governing Council judges that the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent.
The consensus forecast ahead of the report was that the central bank would cut the main rate by 25 basis points to 0.25 percent. The surprising passiveness of the bank certainly helped the loonie to recover from the earlier losses even though crude oil continued to slide during the Wednesday’s trading session.
USD/CAD slipped from the opening level of 1.4576 to 1.4520 as of 19:45 GMT today after touching 1.4686 earlier — the highest rate since April 2003. EUR/CAD was down from 1.5892 to 1.5807, retreating from the daily high of 1.6097. CAD/JPY plunged from 80.67 to 78.97 before rebounding to 80.40.
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