Canadian Dollar Mixed on BoC Decision; QE Continues as CPI Slumps
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CANADIAN DOLLAR OUTLOOK: USD/CAD, EUR/CAD, CAD/JPY PRICES REACT TO BANK OF CANADA DECISION
- Bank of Canada (BOC) just released its latest monetary policy statement and left its target interest rate unchanged at 0.25%
- USD/CAD and EUR/CAD prices jumped and spot CAD/JPY pivoted lower immediately after the BOC decision crossed the wires
- Canadian Dollar (CAD) is coming under pressure as FX traders digest dovish central bank outlook underpinned by sluggish inflation expectations post-COVID
The Canadian Dollar is edging lower in the wake of the BOC statement that just crossed the wires. Bank of Canada officials agreed to leave the policy interest rate unchanged at 0.25% as expected. The central bank also reiterated that it will continue its QE program running at C$5-billion purchases of Canada government bonds per week.
Learn More – How Central Banks Impact the Forex Market
USD/CAD PRICE CHART: 1-MINUTE TIME FRAME (15 JULY 2020 INTRADAY)
USD/CAD price action pressed higher in the wake of the Bank of Canada decision. The Canadian Dollar remains in positive territory on the day against its USD peer, however, as the US Dollar trades broadly lower alongside other safe-haven assets.
Canadian Dollar weakness following the BOC statement is likely explained by dovish verbiage regarding interest rate and inflation outlook. The Bank of Canada governing council noted they plan on holding the overnight cash rate at its current level until economic slack is absorbed and inflation measures recover to target.
EUR/CAD PRICE CHART: 1-MINUTE TIME FRAME (15 JULY 2020 INTRADAY)
EUR/CAD price action whipsawed in the wake of the latest BOC statement. The Euro aimed higher initially against the Loonie, but the pop was short-lived with spot EUR/CAD since pivoting back lower to trade at fresh session lows. Perhaps a rejection of technical resistance around the 1.5500-handle, which is underpinned by May’s swing high, could partly explain the stretch of EUR/CAD weakness.
Additionally, the European Central Bank is on tap to release its own monetary policy update on Thursday, 16 July at 11:45 GMT, thus leaving the Euro at risk ahead of this potentially market-moving event. The EU Summit scheduled this week also looms large over the bloc currency, which threatens to strongarm the direction of EUR/CAD price action and possibly exacerbate FX volatility recently observed by the pair.
CAD/JPY PRICE CHART: 1-MINUTE TIME FRAME (15 JULY 2020 INTRADAY)
Spot CAD/JPY gyrated following the Bank of Canada decision. The Canadian Dollar dipped into negative territory against the interest-rate sensitive Japanese Yen, but CAD/JPY prices have since ripped back higher to trade flat on the day at the time of writing.
Also noteworthy, crude oil price action could be weighing on the Loonie in light of the strong direct relationship typically held between CAD and oil. Oil is currently facing headwinds from fresh OPEC+ commentary as Saudi Saudi Arabia and Russia agree to start unwinding recently implemented production cuts next month.
Read More – USD/CAD Eyes US Dollar Weakness and Bank of Canada Policy Decision
-- Written by Rich Dvorak, Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.