USDCAD: Bank of Canada, Poloz Comments Weaken Canadian Dollar
-Key benchmark interest rate on hold at 1.00%
-2014 GDP forecasts revised lower to 2.3%, 2015 on hold at 2.5% and 2016 at 2.2%
-Policy moving forward to depend on incoming data
Gov. Poloz Comments:
-BoC remains neutral, higher inflation this year is only transitory
-Central bank cannot ‘shut the door’ on rate cuts
-Weaker CAD has helped boost inflation
The Bank of Canada left rates on hold at 1.00% as expected on Wednesday morning and provided updated GDP forecasts and comments on the CAD FX rate. The central bank lowered its 2014 GDP forecasts to 2.3% from 2.5% prior while leaving the 2015 estimate at 2.5% while the new 2016 forecast released by the central bank is 2.2%.
In regards to the Canadian Dollar exchange rate, the BoC said it assumes the currency will remain at US$0.91 level. In regards to future policy, the central bank once again stated that future policy depends on incoming data and that capacity would be reached over the next two years. In regards to inflation, the 2% target was said as though unlikely to be met until the first quarter of 2016.
The central bank did not sound nearly as dovish as it did at the beginning of the year when Q4 data continued to disappoint market expectations. Over the past few weeks, we have seen data come in to the upside across the board and this has helped the Canadian Dollar achieve highs not seen against the greenback since the start of the year.
USDCAD April 16, 2014 (5M Chart)
Source: FXCM Marketscope
Gregory Marks, DailyFX Research Team
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