The Canadian dollar was firm today, though fell against other commodity currencies. The loonie rallied even after the Bank of Canada signaled that it plans to keep monetary policy accommodative for a long time. Domestic housing data was favorable but hardly had any impact on the Canadian currency.
The BoC held a monetary policy meeting on Wednesday. Surprising no one, the central bank kept its key interest rate unchanged at 0.25%. It also maintained its quantitative easing program with asset purchases of at least C$5 billion a week. The bank said in the statement that it expects a strong recovery of the global and domestic economies at first after governments ease restrictions aimed at halting the COVID-19 pandemic but ultimately the recovery will be “protracted and uneven”, highly dependent on how the pandemic will develop. The statement noted that the rebound in the United States was stronger than expected but the economic performance in emerging markets was more mixed. In the end, the BoC signaled that it is going to keep monetary policy loose until inflation will reach the 2% target:
As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. To reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at the current pace. This QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.
As for economic data, Canada Mortgage and Housing Corporation reported that the number of housing starts rose to 262,396 in August from 245,425 in July. That surprised experts who were expecting a drop to 222,000.
The Canadian dollar also got a boost from rising crude oil prices. The North American grade of crude climbed more than 3% during Wednesday’s trading, while the global benchmark Brent grade rose as well, jumping more than 2%.
USD/CAD dropped from 1.3235 to 1.3154 as of 19:55 GMT today. EUR/CAD fell from 1.5581 to 1.5534. At the same time, AUD/CAD gained from 0.9545 to 0.9580.
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