The Canadian dollar weakened against major currencies after the Bank of Canada announced that it would be maintaining its benchmark interest rate at 0.5%. The announcement triggered a rally among the loonie’s major competitors as the currency lost most of the gains it had made against other currencies this year.
The Canadian dollar suffered major losses against other currencies such as the US dollar, the Japanese yen and the British pound.
The loonie’s losses can be attributed to the fact that other currencies are performing extremely well while Stephen Poloz, the BoC governor, did not announce any major positive news.
The British pound was stronger against the Canadian dollar boosted by Theresa May‘s speech, which clarified the UK’s hard Brexit strategy for leaving the EU. The greenback’s rally against the loonie can also be traced to positive market sentiment towards the US dollar given that Donald Trump is assuming office on Friday.
The short-term future of the Canadian dollar will largely be determined by events in the USA, especially if Donald Trump initiates processes to weaken the US dollar, which might force the Bank of Canada to change interest rates. Otherwise, most analysts expect the BoC to maintain the same interest rate throughout the year.
The USD/CAD was trading at 1.3219 as at 18:07 GMT having tested lows of 1.0351 before the announcement. The CAD/JPY was trading at 85.88 having tested highs of 86.82 earlier in the day. The GBP/CAD was trading at 1.6254 having tested lows of 1.6069.
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