Canadian Dollar Strengthens Against US Dollar on BoC Interest Rate Announcement

The Canadian dollar today strengthened against the US dollar even as the Bank of Canada announced that its interest rates will remain unchanged. Although the bank maintained interest rates, it highlighted the fact that the Canadian economy could achieve sustainable growth into the future.

The USD/CAD currency pair today hit new session lows as the currency pair lost about 100 points at the height of its decline, but had retraced some of its losses at the time of writing.

The Canadian dollar strengthened even as the Bank of Canada announced that it would maintain its base interest at 0.5% and that it was not considering a rate cut as the Canadian economy had grown at a rate faster than expected. The BoC Governor Stephen Poloz stated that there are significant uncertainties in the future and that a rate cut could be implemented if the risks were realized.

The USD/CAD currency was also affected by the weaker greenback during its brief decline, although the currency pair later rallied higher due to the stronger greenback as tracked by the US Dollar Index.The Canadian dollar was performing better than the US dollar given the higher oil prices and the lower US bond yields.

The currency pair is likely to be affected by the Canadian new housing price index and the US University of Michigan confidence index, both scheduled for release tomorrow.

The USD/CAD was trading at 1.3322 as at 17:38 GMT having retraced most of its losses from a daily low of 1.3248. The CAD/JPY was trading at 82.44 having risen from a daily low of 81.99 prior to the announcement.

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