The Canadian dollar jumped following the monetary policy meeting of the Bank of Canada as the central bank’s statement turned out to be not as dovish as market participants were expecting.
The BoC left its main interest rate at 0.5% as was widely expected. Markets also expected a dovish statement, especially after inflation missed economists’ projections. Yet instead, the central bank voiced optimism about both global and domestic economies, stating about Canada’s economy:
The Canadian economyâs adjustment to lower oil prices is largely complete and recent economic data have been encouraging, including indicators of business investment. Consumer spending and the housing sector continue to be robust on the back of an improving labour market, and these are becoming more broadly based across regions.
The optimistic remarks helped the Canadian currency to ignore oil prices, which fell as traders were nervous ahead of tomorrow’s meeting of the Organization of Petroleum Exporting Countries.
Now, market participants wait for policy minutes from the Federal Reserve scheduled for release at 18:00 GMT today. While analysts generally anticipate the Fed to be less aggressive with monetary tightening than was previously expected, June interest rate hike is still in the cards, and the minutes may increase or decrease chances for it depending on the language the Fed decides to use.
USD/CAD dropped from 1.3512 to 1.3453 as of 15:41 GMT today. EUR/CAD declined from 1.5109 to 1.5031. CAD/JPY rallied from 82.68 to 83.30, rising for the fifth day in a row.
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