The Canadian dollar today rallied to new highs against most of its peers including the US dollar after the Bank of Canada announced its interest rate decision in the early American session. The loonie’s rally was further boosted by the hawkish tone in the bank’s monetary policy statement, which investors interpreted as hinting at more rate hikes in future.
The USD/CAD currency pair today dropped from a high of 1.3100 in the European session to a low of 1.2984 after the BoC announcement.
The currency pair today traded in a range from the Asian session into the European session before suddenly dropping to new lows after the BoC announcement. The BoC raised its target rate by 25 basis point to 1.75% from the previous 1.50%, which was in line with market expectations. The rate hike forced the pair lower as the loonie rallied higher and overpowered the US dollar, which was quite strong at the start of the session. The pair then retraced some of its losses before heading lower.
The hawkish tone adopted by the BoC in its monetary policy report where it cited the recent US, Canada and Mexico trade deal as being a major positive for the Canadian economy among other factors was interpreted as being hawkish by investors, which boosted the loonie.
The pair’s future performance is likely to be influenced by geopolitical events and global crude oil prices.
The USD/CAD currency pair was trading at 1.2984 as at 16:08 GMT having dropped from a high of 1.3100. The CAD/JPY currency pair was trading at 86.72 having rallied from a low of 85.83.
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