Canadian Dollar Rallies on Inflation Report, Crashes on BoC Rate Decision

The Canadian dollar today rallied against its US counterpart in the first half of today’s session driving the USD/CAD to its daily lows boosted by in-line inflation figures. However, the currency pair quickly reversed course after the Bank of Canada announced its rate decision, which was interpreted as being very dovish.
The USD/CAD currency pair today fell to a daily low of 1.3036 in the early American session before spiking to a high of 1.3140 two hours later following the BoC rate decision.
The currency pair traded with a bearish bias shortly after the start of the Asian sessions and into the European session driven mostly by the soft greenback. The US Dollar Index headed lower during this period to hit a daily low of 97.44 in the early American session. The Release of the mixed Canadian consumer price index report for November by Statistics Canada helped the loonie rally. The headline CPI print met expectations while the core CPI print missed consensus estimates. The loonie crashed after the Bank of Canada released its rate statement keeping interest rates stable at 1.75% as expected, followed by a dovish monetary policy report.
The release of the upbeat US housing price index for November by the Federal Housing Finance Agency and the positive US existing homes sales report by the National Association of Realtors also boosted the currency pair.
The currency pair’s short-term performance is likely to be affected by BoC Governor Stephen Poloz‘s speech later today.
The USD/CAD currency pair was trading at 1.3124 as at 16:03 GMT having rallied from a low of 1.3036. The CAD/JPY currency pair was trading at 83.75 having dropped from a high of 84.35.

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