Canadian Dollar Swoons in Response to Dovish Bank of Canada Remarks
CANADIAN DOLLAR, BANK OF CANADA RATE REVIEW – TALKING POINTS:
- USDCAD moves sharply higher following the latest monetary policy update from the Bank of Canada
- BOC Governor Poloz provided dovish supplementary commentary to the central bank’s interest rate decision which is weighing negatively on CAD currency crosses
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The Bank of Canada just announced that it will leave its policy interest rate unchanged at 1.75 percent as expected. However, the Canadian Dollar is coming under pressure due to dovish language found in the accompanying press release.
USDCAD PRICE CHART: 1-MINUTE TIME FRAME (APRIL 24, 2019 INTRADAY)
The BOC’s governing council said that “an accomodatitve policy interest rate continues to be warranted” and appears to be slightly more dovish than March’s language which read “outlook continues to warrant a policy interest rate that is below its neutral range.”
Ongoing risks to global trade relations dragg down business sentiment and activity were repeated. This was previously mentioned by the BOC in its Business Outlook Survey Indicator released last week which fell to its lowest level since 3Q 2016.
On a brighter note, Poloz stated earlier this month that Canada’s exports were showing signs of strength, particularly in the service sectors which employs roughly 80 percent of Canadians. Moreover, oil prices have climbed nearly 20 percent since the BOC’s last monetary policy update which looks to bolster Canada’s economy due to the country's significant production and export of the energy product.
The central bank expects growth to rebound in the second quarter this year and projects real GDP growth of 1.2 percent. The BOC said that it will closely watch developments across household spending, oil markets and global trade policy to guide its monetary policy decisions. The Bank of Canada’s next monetary policy update is scheduled for May 29.
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- Written by Rich Dvorak, Junior Analyst for DailyFX
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.